FINA 4310 Lecture Notes - Lecture 3: Underwriting, Investment Banking, Primary Market
Document Summary
Chapter 3: 3. 1 how firms issue securities: primary vs. Secondary: primary market, new securities (stocks, bonds) are created. Issuer does not receive proceeds: 3. 1 how firms issue securities: ipo. In other words, the time between pricing and issuance is 48 hours or less. An accelerated bookbuilding process is frequently implemented overnight, with the issuing company contacting a number of investment banks that can serve as underwriters on the evening prior to the intended placement. To select the investment bank, the seller/issuer solicits bids in an auction-type process and awards the underwriting contract to the bank that commits to the highest back stop price. The underwriter then markets the issue with a price range to institutional investors. Initial margin requirement (imr: 3. 8 buying on margin, reg t: minimum imr set by federal reserve under regulation t, currently 50% for stocks i. e. minimum % of initial investor equity. [1 imr] = max % amount investor can borrow.
