Assignment 2: synopsis of “How corporations issue securities”
The aim of this section is to summarize the various procedures of issuing securities, which will be divided and developed into severalsections.
First, the section will focus on young venture capitals, which in other words are infant companies who are aiming to raise capital through issuing securities, which will be later sold tounderwriters and different types of investors. Their final goal is to make their company public, which will be looked at further in this paper.
Secondly, once the company has found investors and gonepublic, it will deal with an initial public offer.
Finally, the section will focus on other new issue procedures such as different types of auctions, and the differences between private placementsand public issues.
When a venture capital first launches its start up status, it enters a venture capital market where the company faces different options of finding investors.
The investors can beidentified in to four different sections: Angel investors, which are private individuals, corporate venturers, carried interest, and finally private investing.
The venture capitalist then have twooptions: either get sold out to a larger firm or go public. Several ventures go public as in that case selling issues generates larger profit.
In order to go public venture capitalists need to sellissues through underwriters, “the financial midwives to a new issue”(brealey,2008) who are meant to know the market and avoid overpricing. To do so, they create an initial product offering (IPO) : firstthere is the primary offering in which additional shares are sold to generate new cash . There is also the secondary offering where existing shareholders sell their share also in order to generate newcash. The latter most often concerns Governments.
When arranging the IPO, an underwriter first issue procedural advice, then buy the issue and finally resells it to the public. The company...
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