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Introduction
1. Reasons for marking an equity offering outside its home jurisdiction:
(1) To establish access to well-developed foreign capital markets for
immediate and future financing needs
(2) To overcome limited investor appetite in the home market/tap into foreign
investor interests;
(3) To achieve a desired investor base in a particular foreign country for
strategic/business reasons
(4) To gain attention from analysts
(5) To benchmark against a more appropriate peer group
(6) To gain publicity or enhance international prestige
2. Destination for issuers in search of international capital:
(1) Until the 2000s, it is US markets
(2) Between 2002 and 2001, 41% IPOs in LSE, 23% in NY
(3) SG and HK as hubs for the Asia-Pacific region
3. Consider factors for international IPO:
(1) Geographical proximity
(2) More intense competition between exchanges facilitated by technological
improvements
(3) Regulation/regulatory enviroment
(4) Listing standards
(5) Fees
(6) Valuation
(7) The quality of an exchanges institutional investors and their
understanding of a companys business
IPO methods
1. Introductions
2. Placings
3. Intermediaries offers
4. Offers for sale and subscription
Introductions
Placing
Intermedia Offers for sale
ries offers
and
or
subscription
What
A
companys A placing is a Similar
to Is made by a
is
shares
are marketing of and
companys
already widely shares to a combined
sponsor
to
the
held
with
at selected and with
a public
(retail
least 25% of limited group placing
offer)
and
the
shares of,
usually A marketing institutional
being in public institutional
of new or investors.
hands,
those investors
existing
The shares being
shares may be
means of an offered may be
introduced to
offer by, or existing
shares
the
market
on behalf of held by current
without
the
the
shareholders (offer
issue of new
company to for sale) or new
shares or any
intermediari shares (offer for
marketing
of
es for them subscription)
existing shares
to allocate
to
their
own, usually
private
clients
featur
e
Raises no fund
Used
situati
ons
Demerged from
their
parent
companies
Companies
seeking
a
standard listing
of their shares
in
circumstances
where
their
shares
are
already listed in
another
jurisdiction.
Standard
practice
to
involve
bookbuilding
a pathfinder or
price-range
prospectus
would
be
made
available
Normally
underwritten
Qualified
investors:
professional
clients
and
eligible
counterparties
Subsequent resale of securities to which an exemption applied is
regarded as a peparate offer and may require a prospectus
unless an exemption applies
A retail cascade(whereby securities are sold first to an
intermediary, such as an investment bank, and then onto retail
distributors) does not require a separate prospectus so long as a
valid prospectus is available and the issuer or the person
responsible for drwing up the prospectus has consented to its
use.
A Brief Transatlantic Comparison
1. Broadly similar:
Trigger extensive disclosure requirements
Listed issuers are subject to an array of demanding regulatory
requirements
These requirements are modified in certain respects for foreign issuers
There are numerous exemptions from the general disclosure and other
requirements that, among other things, facilitate international offerings of
securities targeted at sophisticated investors who can fend for
themselves
2. US:
US Securities Act of 1933, s5: public offer or sale of any security in USA
need
Registration statement with respect to that security filed with
the SEC has become effective and delivery of a prospectus forming
securities
exchange or
automated
inter-dealer
quotation
system
on
resale
other
than
those made
outside the
US
QIB:
A QIB is
(a) an institution that owns and invests on a discretionary basis at
least US$100 million in qualifying securities (US$10 million if the
person is a US broker-dealer), or
(b) an entity owned by a QIB, or
(c) a US broker-dealer buying as agent for, or in a riskless principal
transaction
for
resale
to,
a
QIB.
In addition, banks and savings and loan associations with a net worth
of at least US$25 million are also QIBs.
Regulation D
Rule 10b-5 liability under the exchange act of 1934 is the basic antifraud provision of the federal securities law. It prohibits fraudulent
devices, schemes, and practices and also misstatements/omissions of
material facts (but negligence is not enough). It gives rise to a private
remedy in the hands of injured investors
Rule 144A
1. The time consuming process and costs associtated with SEC
registration
2. The ongoing US periodic reporting requirement
3. Potential US GAAP reconciliation requirements
4. The applicability of Sarbanes Oxley