25 years: Capital markets
In the second video of his series Rupert explains the main equity capital raising options that are available to listed companies. He outlines what a ‘Placing’ is, who can participate in them, alongside their main advantages and disadvantages. In the final chapter Rupert unravels what an open offer is, the period it is open for and when it is typically used.
In the second video of his series Rupert explains the main equity capital raising options that are available to listed companies. He outlines what a ‘Placing’ is, who can participate in them, alongside their main advantages and disadvantages. In the final chapter Rupert unravels what an open offer is, the period it is open for and when it is typically used.
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13 mins 36 secs
A Company has decided that it wants to issue equity capital, what options does it have?
The main driver of the choice of transaction structure is how much money the company needs to raise.
Key learning objectives:
Define Placing
Describe an Open Offer
Describe a Rights issue
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An issue of shares that is not offered solely to existing shareholders, sometimes also referred to as a placement, a follow-on offering or a capital increase.
When a company wishes to undertake a placing which is larger than the non-pre-emptive threshold. It will need to seek shareholder approval to carry out such a placing.
It is an offer of shares solely to existing shareholders at a fixed subscription price. Open offers are almost always combined with a placing. The effect of this is that in the event that the open offer does not achieve full take-up, the places in the conditional placing will take up the shortfall. Another reason for combining a placing with an open offer is to give existing retail shareholders more time to be able to participate.
A rights issue is an offer of shares made via the issue of rights to subscribe for the new shares to existing shareholders. They are required:
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