Docstoc

Equity

Document Sample
Equity Powered By Docstoc
					Equity


         Chapter 12




June 22, 2011     Chapter 11 - Equity Financing   1
Crosslisting
 reduce information asymmetry
      increases share price
      lower WACC
 improve liquidity
      larger primary market
      larger secondary market
 hedge operating risk
      denominate both assets and liabilities in
       terms of the same currency
June 22, 2011     Chapter 11 - Equity Financing    2
Depository receipts
 negotiable certificates
      issued by foreign bank
           backed by underlying security
           traded in secondary markets
 representing a multiple of underlying
  shares
      traded in & dividends paid in foreign
       currency terms
      DRs traded in accordance with foreign
       securities regulations
      sponsored (firm)- unsponsored (investor)

June 22, 2011         Chapter 11 - Equity Financing   3
Cross listing
 Listing shares on different country
  exchanges
 Purpose of crosslisting
      Improving liquidity
           More potential investors
           International recognizability
      Eliminate mispricing (underpricing)
      Establish secondary market shares
       offered for foreign acquisitions
June 22, 2011         Chapter 11 - Equity Financing   4
Relative market liquidity
 Value of trades in the year 2002
         NYSE       $10,311,156,000,000 (2,366)
         NASDAQ      $7,254,594,000,000 (3,649)
         LSE         $4,001,340,000,000 (2,274)
         Euronext    $1,988,359,000,000 (1,114)
         Tokyo       $1,564,244,000,000 (2,154)
         Deutsche    $1,212,302,000,000   (934)
         Spain         $653,229,000,000 (1,015)
         Italy         $634,635,000,000   (295
         Swiss         $599,749,000,000   (398)
         Taiwan        $633,632,000,000   (641)
         Korea         $596,632,000,000   (679)

June 22, 2011        Chapter 11 - Equity Financing   5
Empirical evidence
 share price reaction to crosslisting
      negative effects to US firms listing in
       continental Europe
      positive effects to US firms listing in
       London, Tokyo, Toronto
      positive effects for foreign firms listing in
       the US
 the larger a firm relative to its
  domestic market, the more likely it
  was to crosslist elsewhere
June 22, 2011      Chapter 11 - Equity Financing   6
Barriers to crosslisting
 disclosure requirements vary with
  markets
 rules in N. America
      informationally onerous
      expensive
      feed information to market
 rules elsewhere less stringent
      reporting less frequent
      lower disclosure requirements
June 22, 2011    Chapter 11 - Equity Financing   7
The New York Stock exchange
 specialists
      trade on floor
      hold positions for liquidity
 transaction costs (spread)
      function of volume
      function of volatility
 limit orders take precedence over
  dealer orders

June 22, 2011      Chapter 11 - Equity Financing   8
Other exchanges
 London exchange
         less liquid
         higher transaction costs
         limit orders not executed chronologically
         lower regulatory costs
           more foreign firms listing
 Tokyo exchange
      substantially lower overall exchange
       market
June 22, 2011         Chapter 11 - Equity Financing   9
International equity
 directed shares
   targeting financing from target foreign
    market
   private placements
 euro-equity issues
   equity sold in countries different than
    their origin
      tranches - large stock blocks sold to
       underwriters
      underwritten and distributed in multiple
           capital markets11 - Equity Financing
June 22, 2011         Chapter                   10
Directed public share issues
 Float a new issue in a foreign country
      May be needed to finance
           An acquisition of existing production
            facilities
           New production facilities
      Complete foreign underwritten and
       floated




June 22, 2011         Chapter 11 - Equity Financing   11
Strategic alliances
 take advantage
      economies of scale and scope
 marketing
      joint marketing and sales
      Air Canada, United Airlines
 financing
      seeking to lower WACC
 development
      Airbus
June 22, 2011     Chapter 11 - Equity Financing   12
Privatizations
 selling government owned enterprises
      Western Europe
      Eastern Europe
 political will
      employment programs
      profitability
 market forces versus political forces


June 22, 2011      Chapter 11 - Equity Financing   13

				
DOCUMENT INFO