CH11 Equity capital and share market(金融市场学,上海大学,悉尼大学).ppt

Chapter11 Equity capital and share market Equity capital and share market Topics Equity capital for emerging business Initial Public Offering (IPO) Listing requirements Australian Stock Exchange Trading and settlement arrangements Price indices Rights issues Assessing share prices Learning outcomes You should be able to: Describe the source of equity capital for emerging business Describe listing requirements for an IPO Describe SEATS and CHESS and the structure of the share market Explain what a SPI shows Describe the process of a rights issue Assessing share values Equity and emerging business Nature and role of equity capital Retained earnings Venture capital Business angels Initial Public Offering Listing requirements business must be of some size, profitable and be well managed (investment ready) increases company’s ability to raise capital Secondary market for shares ASX Market structure 1100 listed companies, top 10% in size represent 80% of market value Automated trading (SEATS) Electronic settlement (CHESS) Liquidity bid-offer spread price resilience Price discovery Share price determines market value of company Share price index (All Ordinaries Index) weighted index of the share prices of the largest 300 companies shows general movements in share prices constituent indices industrials, mining, 20 leaders, industry groups (used to benchmark price performance) Raising equity capital Rights issue Company issues more shares by issuing rights to buy the new shares A right allows its holder to buy a new share at the subscription price Number of rights issued depends on amount of equity to be raised and subscription price A company that wants to raise $100m will issue 20m rights if the subscription price is $5. If it has already issued 80m shares, the rights will be a 1:4 issue Value of rights Rights will have value because they are an entitlement to buy new shares at a lower price than their market price Theoretical value of rights Calculate R when P = $5