Sourcing Equity Financing Globally
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Questions and Answers

Which factor affects the operational efficiency of financial markets?

  • Market segmentation
  • Types of securities available
  • Operational and governance structures (correct)
  • Historical performance of stocks

    • What does market segmentation refer to in the context of financial markets?

  • The average return on investment
  • The size of the market capitalization
  • The tastes and preferences of investors (correct)
  • The variety of securities available

    • What is one of the primary things a firm must do when sourcing equity financing globally?

  • Pitch itself to international investors (correct)
  • Reduce operational costs significantly
  • Prepare to comply with local regulations
  • Expand its domestic market share

    • Which of the following is NOT a key variable affecting capital finance globally?

    <p>Bonus structures for executives</p> Signup and view all the answers

    When accessing global capital markets, what is crucial for a firm?

    <p>Integrating access into its long-term financing strategy</p> Signup and view all the answers

    Which market typically serves as the primary source of initial capital for most firms?

    <p>Local Domestic Markets</p> Signup and view all the answers

    What is suggested as a first step for a firm wishing to list on foreign markets?

    <p>Identify and choose an investment banker</p> Signup and view all the answers

    What is the primary purpose of equity listing for a firm?

    <p>To ensure the capital raising instruments are traded</p> Signup and view all the answers

    What is a consequence of a strong perceived political risk in financial markets?

    <p>Increased currency depreciation</p> Signup and view all the answers

    Which of the following best describes equity issuance?

    <p>Can be public or private</p> Signup and view all the answers

    What does equity listing NOT involve?

    <p>Bringing in new equity capital to the firm</p> Signup and view all the answers

    How do listings prepare a market for public issuance?

    <p>By providing name recognition and market visibility</p> Signup and view all the answers

    What type of investors are targeted in a private equity issuance?

    <p>Select group of institutional investors</p> Signup and view all the answers

    Which of the following is a characteristic of the listing process?

    <p>It enforces operational and pricing efficiency</p> Signup and view all the answers

    What is a benefit of gaining name recognition through a listing?

    <p>It enhances the firm's investment attractiveness</p> Signup and view all the answers

    Which process is dependent on the ability to raise capital from the public?

    <p>Equity listing</p> Signup and view all the answers

    What are ordinary shares primarily used for in a company?

    <p>Raising equity financing</p> Signup and view all the answers

    What is one of the main objectives when a firm sources finance globally?

    <p>To lower capital costs</p> Signup and view all the answers

    Which of the following best describes preference shares?

    <p>They are a type of security similar to both common shares and debt securities.</p> Signup and view all the answers

    In the context of sourcing global equity financing, what does WACC stand for?

    <p>Weighted Average Cost of Capital</p> Signup and view all the answers

    What is a key difference between domestic CAPM and ICAPM?

    <p>ICAPM applies international financial parameters, whereas domestic CAPM applies domestic ones.</p> Signup and view all the answers

    Which factor is NOT considered a key variable affecting capital cost and availability?

    <p>Global economic trends</p> Signup and view all the answers

    What is the impact of issuing ordinary shares on a company's cash flow?

    <p>It generally results in less strain on cash flow due to dividend payments.</p> Signup and view all the answers

    What is one consideration for a firm when sourcing capital globally?

    <p>The firm’s internal profitability and financial performance</p> Signup and view all the answers

    What is the primary goal of investors purchasing capital raising instruments from an ailing firm?

    <p>To gain control and turn the organization around</p> Signup and view all the answers

    What is an Initial Public Offer (IPO)?

    <p>The initial sale of new shares by a firm to raise capital</p> Signup and view all the answers

    What characterizes a seasoned public offer?

    <p>It is a subsequent offering of shares by an already listed MNC</p> Signup and view all the answers

    What does a Euroequity issue entail?

    <p>Simultaneous IPOs across multiple stock exchanges in different countries</p> Signup and view all the answers

    What is a significant requirement for both an IPO and a seasoned public offer?

    <p>A team of advisors to facilitate the capital raising process</p> Signup and view all the answers

    What is a primary reason that an MNC may opt for public issuance?

    <p>To share the risk of funding with public investors</p> Signup and view all the answers

    In which scenario is an MNC likely to conduct a Euroequity issue?

    <p>When seeking to maximize capital in international markets simultaneously</p> Signup and view all the answers

    Which of the following is NOT a capital raising method discussed for MNCs?

    <p>Private Placement</p> Signup and view all the answers

    What is one disadvantage of an MNC raising equity capital via an IPO on multiple exchanges simultaneously?

    <p>It incurs higher costs due to multiple listing advisors</p> Signup and view all the answers

    Which of the following statements about directed private issues is correct?

    <p>They involve selling shares to selected private investors</p> Signup and view all the answers

    What are equity shares primarily used for?

    <p>To raise equity financing through IPOs and seasoned issues</p> Signup and view all the answers

    What is a characteristic of preference shares?

    <p>They are hybrid securities that may have various preferences</p> Signup and view all the answers

    Why might an MNC choose a private placement over an IPO?

    <p>It can be less costly and requires less regulatory compliance</p> Signup and view all the answers

    What does the value of each equity share sold need to conform to?

    <p>The preferences of investors in the issuing country</p> Signup and view all the answers

    Which of the following best describes the need for a team of advisors in directed private issues?

    <p>They are needed to market, value, and prepare the offering</p> Signup and view all the answers

    How do equity shares impact an issuing company's cash flow?

    <p>They pay dividends, thereby reducing strain on cash flow</p> Signup and view all the answers

    Study Notes

    Sourcing Equity Financing Globally

    • Goal: Lower capital costs, increased access to capital, improve competitive edge
    • Capital Cost and Availability is Affected by:
      • Firm-Specific: Financial performance, global presence, general investor perception, security appeal
      • Financial Market Structure: Market size, depth of secondary markets (liquidity), market segmentation
      • Operational Efficiency of Financial Markets: Governance and operational structures, regulatory control, political risk, foreign exchange risk
    • Key Instruments:
      • Ordinary/Equity Shares: Units of ownership, can be issued privately or publicly (IPOs, seasoned issues), fluctuating value based on firm fundamentals, pays dividends
      • Preference Shares: Hybrid security with characteristics of both common shares and fixed-income securities, dividends paid before equity shares, numerous types

    Pathways to Sourcing Global Equity Financing

    • Local Domestic Bond Market
    • International Bond Market: Accessed via public/private pathways
    • Local Equity Market: List and issue
    • International Equity Market (Cross-Listing): List and issue

    Equity Listing

    • Vetting process of MNC's equity raising capabilities
    • Enforces rules for trading between MNC and public
    • Allows MNCs to:
      • Gain name recognition and market visibility

    Equity Issuance "The How"

    • Public Issuance: Shares offered to the public via a stock exchange (IPOs, seasoned offerings)
    • Private Issuance: Shares offered to a select group of investors (institutional investors, HNWI)

    Alternative Methods for Sourcing Global Equity Financing

    • Public Issues:
      • Initial Public Offering (IPO): Initial sale of shares to raise capital
      • Seasoned Public Offering: Subsequent sale of shares to raise capital
      • Euroequity Issue: Simultaneous IPO on multiple stock exchanges
    • Private Issues:
      • Directed Private Issue/Private Placement: Sale of shares to a targeted group of private investors

    Key Instruments Recap

    • Equity Shares: Units of ownership, can be issued privately or publicly
    • Preference Shares: Hybrid securities - various types

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    Related Documents

    Lecture Notes - Sourcing Int Equity Capital - Student Version PDF

    Description

    This quiz explores various aspects of sourcing equity financing on a global scale. It covers key instruments, factors affecting capital costs and availability, and the operational efficiency of financial markets. Understand the distinctions between ordinary shares and preference shares and their implications for firms seeking capital.

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