Corporate Finance Assignement Accounting, Finance Paper (Other (Not Listed) Sample)
I was required to complete a multiple question corporate finance assignment within four hourssource..
CORPORATE FINANCE 3 ASSIGNMENT
Zheng (2012) says that companies with high capital expenditure and high R & D tend to raise more IPOs than those without. Only quoted companies can use this strategy (Pike and Neale, 2006). Küçükkocaoğlu and Alp (2012, p. 5-6) say that the IPO market has three IPO mechanisms: the fixed price offer, the mechanism of book building, as well as selling through the stock exchange. When using fixed price, the researchers reveal that a fixed price that the company offers its securities is provided to investors in advance, Facebook used this method. In the book building method, an investment bank records and generates share demand and calculates the share price that’s ideal for the market and the firm offering an IPO; Safaricom Plc. in Kenya used this method. When selling through the stock exchange, a company must operate within the regulatory framework of the capital markets regulator.
Corporate Finance Institute (2020) says that seasoned equity offering (SEO) is when companies are issue shares to the public after the IPO; it can also be called a Follow On Offering. There are two types of SEO; dilutive and non-dilutive—dilutive ownership results when a firm increases the number of shares outstanding. If the existing investors do not buy the new shares, their pro rata ownership will reduce as they own the same shares as before, but they possess a smaller percentage of the company's total shares. When Tesla, Inc. sold its shares to raise more capital, it was a dilutive SEO. Non-dilutive seasoned issues result when existing shareholders make seasoned issues. In this case, the number of shares remains the same because company founders or managers sell a portion or all their stakes in the company. These issues enable company owners to monetize their positions. When Berkshire Hathaway sold US airline shares, this was a case of non-dilutive SEO.
Grant (2005, p. 4-7) says that the primary role of pre-emptive (PER) rights is to protect shareholders from dilution of control and transfer of wealth. Concerning raising capital, applying PER rights strictly may inhibit the broadening of the shareholder base, and efficient raise of new capital. The current market price of equity determines the valuation of rights, the number of shares the company is issuing, and the issue price (discount) of the new shares regarding the current number of outstanding shares. The more the amount of equity a company is issuing, the higher the value of the rights, and conversely, the amount of dilution the current shareholders suffer. PER rights dilute future earnings and have control benefits concerning ordinary shares that have voting rights of ownership. The impact of pre-emptive rights on ordinary issues differs from one country to another based on the firms involved and the nation's predominant ownership structures.
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