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Summary Equity Finance Exam Bundle - High Distinction

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  • Course
  • Equity Finance (EQUITY)
  • Institution
  • BPP University College Of Professional Studies Limited (BPP)

Equity Finance Exam Bundle (Revision Notes). High distinction achieved in Equity Finance and in LPC course overall. Useful for open note exams to quickly consult topic area as well as to memorise for closed note. Exam Structures usefully highlighted.

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Document information

  • July 27, 2022
  • 191
  • 2021/2022
  • Summary

Subjects

  • equity
  • equity finance
  • corporate finance
  • takeovers

Written for

  • BPP University College Of Professional Studies Limited (BPP)
  • Unknown
  • Equity Finance (EQUITY)
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EQUITY FINANCE EXAM BUNDLE

Table of Contents
SGS 1 – Flotation: Preparations for Listing 3
Advantages + Disadvantages of a flotation 4
Preparations for Listing on the Main Market 7
SGS 2 – Flotations 2: Offer + Listing Applications Process 19
Retail vs Institutional Offers 21
Pre marketing steps 22
Format and Content Requirements of a Prospectus…………………………………………………………..26

Key Stages in Offer and Listing Application Process………………………………………………………..30

SGS 3 – Alternatives to a Premium Listing ……………………………………………………………………………………..34

Key Differences Between AIM and Standard/Premium Listing……………………………………………………..36

Advantages/Disadvantages of AIM vs Main Market………………………………………………………………..38

Advisers on an Admission to AIM………………………………………………………………………………………….41

Admission Requirements for AIM……………………………………………………………………………………….43

Admission Document Contents……………………………………………………………………………………….46

SGS 4 – Liabilities for Share Issues…………………………………………………………………………………………….53

Verification Process……………………………………………………………………………………………………………………53

Statutory/Regulatory Controls on Financial Promotion…………………………………………………………….54

Statutory/Regulatory Liabilities …………………………………………………………………………………………….63

Potential Liability For Matters Arising After Publication of Prospectus + Before Or After
Commencement Of Trading………………………………………………………………………………………………………….70

SGS 5 – Secondary Share Issues (1) …………………………………………………………………………………………….78

Rights issue (detail) …………………………………………………………………………………………………………………..80

Open offers (detail)………………………………………………………………………………………………………………….89

Placings (detail)…………………………………………………………………………………………………………………….92

Comparison table for exam……………………………………………………………………………………………….97

Process for secondary share issues…………………………………………………………………………………102

SGS 6 – Secondary Share Issues (2)

Worked exam style qu (different proposals re resolution)………………………………………………………..105


1

,Timetable for a rights issue…………………………………………………………………………………………………………..117

SGS 7 – Continuing Obligations ……………………………………………………………………………………………………121

Disclosure of inside info (when to disclose) MAR 17(1)……………………………………………………………….121

Inside Dealing Criminal Liability ……………………………………………………………………………………………...126

Market Abuse Civil Liability…………………………………………………………………………………………………..127

Other commercial considerations/issues……………………………………………………………………………129

Disclosure obligations, share dealings – PDMR + Company……………………………………………130

Disclosure obligations, share dealings – Shareholders + Company…………………………….134

SGS 8 – TAKEOVERS (Overview + Preparation for Takeover Bid) ………………………………………………..142

Timetable for Recommended Offer…………………………………………………………………………………………….143

Announcements under Takeover Code……………………………………………………………………………………146

Commencement of Offer Period………………………………………………………………………………………….149

Restrictions/requirements on STAKEBUILDING ………………………………………………………………..158

SGS 9 – Structuring a Takeover Bid + Schemes of Arrangement……………………………………………………166

Contractual Offer vs Scheme (details + thresholds) table………………………….………………………………….166

Contractual Offers vs Scheme of Arrangement (pros and cons) table……………………………………….169

Maths explained……………………………………………………………………………………………………………………175

Types of Consideration………………………………………………………………………………………………………176

SGS 10 – Conduct of a Takeover Bid (hostile)………………………………………………………………………...177

Hostile Takeover timetable…………………………………………………………………………………………………………..177

Prior Conduct…………………………………………………………………………………………………………………………….179

Documents and Timings………………………………………………………………………………………………………..181

Conditions + Competing Bids…………………………………………………………………………………………….184

Revised Offer/Withdrawing……………………………………………………………………………………………187

De-listing and Going Private……………………………………………………………………………………….188




2

,SGS 1 – FLOTATION – PREPRATIONS FOR LISTING
 identify the key legislation and regulations affecting equity securities in the UK;
 advise your client and its board on the advantages and disadvantages of seeking a
flotation;
 undertake part of a legal due diligence exercise to ensure that your client is an appropriate
applicant for listing on the Official List under the Listing Rules; and
 analyse the management of an applicant company with reference to the UK Corporate
Governance Code.




SGS 1 =
BLUE BOX:
- DUE DILIGENCE
- PREPARATION OF APPLICANT




FTSE 100 – Largest companies by size (share index), most capitalised UK companies.

3

, LSE: Made up of MAIN MARKET and AIM.

Primary issue/FLOTATION = the first time that a company lists and trades the shares on a public
market.

 Flotation/IPO (mean the same thing)

Official list: listed on the main market of the LSE (not AIM)

Full listing: refers to a company being listed on the Official List
RIE: Recognised Investment Exchange



ADVANTAGES AND DISADVANTAGES OF SEEKING A FLOTATION
ADVANTAGES DISADVANTAGES
Mechanism to raise significant amount of Burden of disclosure and reporting
finance requirements – companies listed on the Official
List must comply with large number of
regulatory requirements.
Providing a market – shareholders can take Management time – complex and time
advantage of ready made public markets consuming and will involve significant
investment of management time.
Improve gearing ratio of a company if it is highly Changes to the board – need to ensure directors
indebted. have appropriate expertise and need to comply
with Corporate Governance Code. Stipulates
how board should be made up.
Improves liquidity – have a share price/market Costs and fees: Expense is significant. Advisers
full of shares and have a ranking. Liquid = wider all need to be paid and a lot of cash raised will
pool of investors. need to be used to meet these costs.
Costs are typically 10% of the deal value.
Public profile and marketing – usually good for Accountability and control – board control will
business and the fact it is listed means progress disappear and at shareholder level.
can be closely monitored by investors. Board will be a mixture of execs and non-execs.
Shareholders unlikely to have any stake bigger
Knowledge that company is in compliance with than a few %
the LDPTs and Code makes it more attractive to Institutional investors could block decisions
investors.
Enables shareholders wanting to exit to sell their The raised profile is bad press if something goes
stakes and realise their investment. wrong.
Employee share schemes – tax efficient way of Competitors can buy your shares – hostile
keeping employees incentivised and paying takeovers and makes the company vulnerable.
them.




ADVISERS ON A LISTING TO THE MAIN MARKET
4

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