#3336 - Methods Of Listing Crib Sheet - Public Companies and Equity Finance

Methods of Listing & Types of Offering

1. Placing

   1. Defined in Appendix 1 of the Listing Rules

      1. Marketing of securities already in issued but are not listed or not yet in issue, to specified persons or clients of the sponsor or any securities house assisting in the placing, which does not involve an offer to the public or to existing holders of the issuer’s securities generally

         1. Sponsor (NAME) markets issue to its own (institutional) clients

            1. DO FACTS SUGGEST ANY ARE INTERESTED IN INVESTING?

   2. Advantages

      1. Cheaper

      2. Discretion over who to place with as can pick to whom to sell the shares

         1. Institutional shareholders

            1. Ready source of additional finance

            2. Loyalty in the event of a hostile bid

            3. Easier to administer than a company with a very long shareholder list

         2. Retail shareholders

            1. Liquidity in the shares

            2. Enhanced public profile

            3. Brand awareness

      3. Raise lots of capital

   3. Disadvantages

      1. Institutional shareholders

         1. Reduced shareholder base

            1. Can impede trading as company less liquid

      2. Retail Shareholders

         1. Expensive to administer

2. Public Offer

   1. Offer for subscription

      1. Company issues new shares

         1. Seller of shares is the company

   2. Offer for sale

      1. Existing shareholders offer their shares to new shareholders

         1. Exit mechanism common for private equity companies

         2. Seller of the shares is the shareholder

            1. ARE THERE SHAREHOLDERS WHO WISH OR NEED TO SELL?

               1. Are there 25% of shares in public hands?

                  1. LR 6.1.19R(4)(a) shares held by other directors will not count towards the 25% level

   3. Advantages

      1. Can have a broad base of shareholders

         1. Increases liquidity of the company which facilitates the trading of shares on the market

         2. Offer for subscription raises capital

   4. Disadvantages

      1. Expensive

         1. Involves underwriting

         2. If company is not well known, costs of launching can be more expensive as will require marketing

            1. Appoint PR consultants to raise public awareness of the company and its products

      2. Offer for sale does not raise new capital

3. Intermediaries

   1. Defined in Appendix 1 of the Listing Rules

      1. A marketing of securities already or not yet in issue, by means of an offer by, or on behalf of, the issuer to intermediaries for them to allocate to their own clients

   2. Shares are sold only to those within the definition of an intermediary

      1. An intermediary is defined by the FSA handbook

   3. Advantages

      1. Shares are known to be more liquid as there is a wider base of shareholders

   4. Disadvantage

      1. Very expensive so only suitable for very large IPOs

         1. Considerable administration

         2. Pay commission to intermediaries

4. Introduction

   1. Not defined in the Listing Rules Appendix

   2. Company with shares already held by the public or institutional investors admitted on to the London Stock Exchange without offering any further shares

      1. Often by an overseas company which already has a wide spread of shareholders

         1. LR 6.1.19R(4)(a) must show a sufficiently wide spread of shareholders with at least 25% of shares held in public hands

   3. Advantages

      1. Cheapest method of floatation

         1. No need for underwriting

   4. Disadvantage

      1. Does not raise any capital

      2. Does not afford the company opportunities for listing

5. Types of Listing

   1. Institutional Offer

   2. Retail Offer

   3. Global/International Offer

   4. Employee Offer

   5. Friends/Family Offer

Methods & Types of Listing can be combined

6. Factors to Consider

   1. Do shareholders wish to sell their shares

      1. Offer for sale

      2. Placing

      3. Introduction

      4. Intermediaries

   2. Is capital needed to be raised?

      1. Offer for subscription

      2. Placing

   3. Does the company want liquidity?

      1. Placing (retail offer)

      2. Intermediaries

      3. Offer for sale

   4. Does the company have money to afford the listing?

      1. Intermediaries

      2. Placing (Retail offer)

      3. Public offer

   5. Does the company want a cheap method of...