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Lecture 3

BU473 Lecture Notes - Lecture 3: Initial Coin Offering, Underwriting, Cryptocurrency

Course Code
David Cimon

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BU-473 Lecture 3
Public vs. Private Markets
Public securities are available for trading, either over the counter or on an exchange. In
principle, they are available for purchase by most investors
Private securities haven’t been listed for public sale, which means they can’t be traded on
o As a result, trading in private securities often has much higher transaction costs
In some countries, securities in private markets can only be traded by certain types of investors,
often referred to as Accredited investors
Private Markets
Becoming a public company is costly and requires public disclosures
However, there are costs to remain private:
o Raising money is difficult
o Liquidity issues
Public Markets
Public companies go public through IPOs, and issue new shares through secondary offerings
IPOs are the process of private firms becoming public
The process is conducted by underwriters, Investment Banks
o They help with advising the firm on pricing and sizing, prospectus preparation, and
marketing the securities
IPO Contracts
o Firm Commitment/Bought Deal, the underwriter buys the shares for the company at an
agreed-upon price, the underwriter then sells them and earns the difference
o Best Efforts contract, underwriter agrees to get the best price available from investors
IPO Alternatives
Remaining private
Direct Listing: allow initial investors to sell their shares directly
Initial Coin Offering: Sell cryptocurrency coins
Trading Process
1. Market Type
2. Order Type
3. Settlement Process
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