Podcast
Questions and Answers
Which factor affects the operational efficiency of financial markets?
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?
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?
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?
Which of the following is NOT a key variable affecting capital finance globally?
When accessing global capital markets, what is crucial for a firm?
When accessing global capital markets, what is crucial for a firm?
Which market typically serves as the primary source of initial capital for most firms?
Which market typically serves as the primary source of initial capital for most firms?
What is suggested as a first step for a firm wishing to list on foreign markets?
What is suggested as a first step for a firm wishing to list on foreign markets?
What is the primary purpose of equity listing for a firm?
What is the primary purpose of equity listing for a firm?
What is a consequence of a strong perceived political risk in financial markets?
What is a consequence of a strong perceived political risk in financial markets?
Which of the following best describes equity issuance?
Which of the following best describes equity issuance?
What does equity listing NOT involve?
What does equity listing NOT involve?
How do listings prepare a market for public issuance?
How do listings prepare a market for public issuance?
What type of investors are targeted in a private equity issuance?
What type of investors are targeted in a private equity issuance?
Which of the following is a characteristic of the listing process?
Which of the following is a characteristic of the listing process?
What is a benefit of gaining name recognition through a listing?
What is a benefit of gaining name recognition through a listing?
Which process is dependent on the ability to raise capital from the public?
Which process is dependent on the ability to raise capital from the public?
What are ordinary shares primarily used for in a company?
What are ordinary shares primarily used for in a company?
What is one of the main objectives when a firm sources finance globally?
What is one of the main objectives when a firm sources finance globally?
Which of the following best describes preference shares?
Which of the following best describes preference shares?
In the context of sourcing global equity financing, what does WACC stand for?
In the context of sourcing global equity financing, what does WACC stand for?
What is a key difference between domestic CAPM and ICAPM?
What is a key difference between domestic CAPM and ICAPM?
Which factor is NOT considered a key variable affecting capital cost and availability?
Which factor is NOT considered a key variable affecting capital cost and availability?
What is the impact of issuing ordinary shares on a company's cash flow?
What is the impact of issuing ordinary shares on a company's cash flow?
What is one consideration for a firm when sourcing capital globally?
What is one consideration for a firm when sourcing capital globally?
What is the primary goal of investors purchasing capital raising instruments from an ailing firm?
What is the primary goal of investors purchasing capital raising instruments from an ailing firm?
What is an Initial Public Offer (IPO)?
What is an Initial Public Offer (IPO)?
What characterizes a seasoned public offer?
What characterizes a seasoned public offer?
What does a Euroequity issue entail?
What does a Euroequity issue entail?
What is a significant requirement for both an IPO and a seasoned public offer?
What is a significant requirement for both an IPO and a seasoned public offer?
What is a primary reason that an MNC may opt for public issuance?
What is a primary reason that an MNC may opt for public issuance?
In which scenario is an MNC likely to conduct a Euroequity issue?
In which scenario is an MNC likely to conduct a Euroequity issue?
Which of the following is NOT a capital raising method discussed for MNCs?
Which of the following is NOT a capital raising method discussed for MNCs?
What is one disadvantage of an MNC raising equity capital via an IPO on multiple exchanges simultaneously?
What is one disadvantage of an MNC raising equity capital via an IPO on multiple exchanges simultaneously?
Which of the following statements about directed private issues is correct?
Which of the following statements about directed private issues is correct?
What are equity shares primarily used for?
What are equity shares primarily used for?
What is a characteristic of preference shares?
What is a characteristic of preference shares?
Why might an MNC choose a private placement over an IPO?
Why might an MNC choose a private placement over an IPO?
What does the value of each equity share sold need to conform to?
What does the value of each equity share sold need to conform to?
Which of the following best describes the need for a team of advisors in directed private issues?
Which of the following best describes the need for a team of advisors in directed private issues?
How do equity shares impact an issuing company's cash flow?
How do equity shares impact an issuing company's cash flow?
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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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.
