lets say vodafone floats and raises 1million pounds, besides issueing new shares, does vodafone make money via commissions an investor pays to buy and sell shares in the company? for example, i trade on iii.co.uk........does any of the £10 goes to the vodafone for recuiting the brokers at the trading post of the london stock exchange (specialist) who handles the companies tranactions. if, yes-is profit made?or do all commisions go to the brokerage firm and the stock market? thanks.....
ewilcox
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Umm...ok.
Kinda basic but I guess we all have to learn. VOD will use brokers (or more likely investment banks) to float a new issue. They pay nothing for this (ish - and yes (for others I know theres more than that)). You as a punter if you believe the stock is worth something will buy it paying a spread to the broker you buy it from. Thats about it.
Or... to answer your question more directly - no none of your £10 goes to vodafone.
Kinda basic but I guess we all have to learn. VOD will use brokers (or more likely investment banks) to float a new issue. They pay nothing for this (ish - and yes (for others I know theres more than that)). You as a punter if you believe the stock is worth something will buy it paying a spread to the broker you buy it from. Thats about it.
Or... to answer your question more directly - no none of your £10 goes to vodafone.
SOCRATES
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This is not correct, sorry.
The proceeds of the sale as a result of a flotation goes to the original shareholders previous to the float.
They are selling their entiltlement to ownership of the company that is going from their hands and into the hands of the public as a result of it being floated, less the costs of carrying out this transfer, including all the administrative, legal and other costs.
The institution that carries out the flotation is known as an "Issuing House".
The stock remains free of stamp for a predetermined period of time or until the stock becomes fully paid.
This type of stock is known a "new" for this reason.
Additionally, there are six tyoes of flotations:~
Offer.
Offer for sale.
Offer for sale by tender.
By introduction.
By placing.
By private placing,
In my day, all these new issues were announced in the form of grand looking adverisements in the national papers, and appeared "as a matter of record only". They were affectionately known as "tombstones". <g>.
The proceeds of the sale as a result of a flotation goes to the original shareholders previous to the float.
They are selling their entiltlement to ownership of the company that is going from their hands and into the hands of the public as a result of it being floated, less the costs of carrying out this transfer, including all the administrative, legal and other costs.
The institution that carries out the flotation is known as an "Issuing House".
The stock remains free of stamp for a predetermined period of time or until the stock becomes fully paid.
This type of stock is known a "new" for this reason.
Additionally, there are six tyoes of flotations:~
Offer.
Offer for sale.
Offer for sale by tender.
By introduction.
By placing.
By private placing,
In my day, all these new issues were announced in the form of grand looking adverisements in the national papers, and appeared "as a matter of record only". They were affectionately known as "tombstones". <g>.
SOCRATES
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The Issuing House will advise the client on the best strategy of effectively taking the company to market. The Issuing House or the client is also likely to engage the services of consultants and advisors specialised to give advice on valuation, strategy and so on.
There are various varieties as I detail above. The object of the excercise is to get the whole issue subscribed, i.e., taken up.
If the whole issue is not taken up the Issuing House will absorb the balance and hold it, until such time that market conditions allow for it to be placed, either with an institution or with private investors or what is known as a "blend" thereof. This is in the event that the flotation does not meet with the success expected. In occasions such as these the new stock is likely to sell at a discount.
If if the whole issue is taken up the Issuing House will have no need to absorb the balance and ( if need be support the price) it is likely that the issue will float at par.
If there is excessive demand over and beyond what is available, then the applications for stock will be capped, meaning that the number of shares allowed (alloted) per application will be limited in order for even distribution to be effected. Any excess of demand over supply at flotation is going to cause the price to start off at a premium.
Of course, the experience and knowledge of the trader who specialises in new issues( known as a stag) ~ ( the practice of trading in new stock is known as Stagging) has to be matched by the expertise of the issuing house in how the float is effected and how the issue is priced in order to satisfy the supply - demand criteria and the success of the venture.
There are critical points in the progress of a market in which flotations are avoided because conditions are not deemed to be right for this kind of operation. Market conditions have to be favourable for a flotation to be successful.
There are other technical considerations to be taken into account, too complicated to enter into here, but this one by far in terms of timing and opportunity is by far the most important.
There are various varieties as I detail above. The object of the excercise is to get the whole issue subscribed, i.e., taken up.
If the whole issue is not taken up the Issuing House will absorb the balance and hold it, until such time that market conditions allow for it to be placed, either with an institution or with private investors or what is known as a "blend" thereof. This is in the event that the flotation does not meet with the success expected. In occasions such as these the new stock is likely to sell at a discount.
If if the whole issue is taken up the Issuing House will have no need to absorb the balance and ( if need be support the price) it is likely that the issue will float at par.
If there is excessive demand over and beyond what is available, then the applications for stock will be capped, meaning that the number of shares allowed (alloted) per application will be limited in order for even distribution to be effected. Any excess of demand over supply at flotation is going to cause the price to start off at a premium.
Of course, the experience and knowledge of the trader who specialises in new issues( known as a stag) ~ ( the practice of trading in new stock is known as Stagging) has to be matched by the expertise of the issuing house in how the float is effected and how the issue is priced in order to satisfy the supply - demand criteria and the success of the venture.
There are critical points in the progress of a market in which flotations are avoided because conditions are not deemed to be right for this kind of operation. Market conditions have to be favourable for a flotation to be successful.
There are other technical considerations to be taken into account, too complicated to enter into here, but this one by far in terms of timing and opportunity is by far the most important.
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Airthrey Capital
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An interesting example of this was in the late 1980's when Blue Arrow, a small Uk recuitment company, wanted to purchase ManPower, a much larger US Recruitment company.
In order to raise sufficient funds to make this huge purchase, Blue Arrow needed to issue new shares to shareholders in return for their hard earned cash.
Blue Arrow appointed Phillips & Drew (now UBS) to "underwrite" the issue.
Phillips & Drew publicly announced that they had successfully placed all the new shares with various institutions. The Blue Arrow share price remained stable.
In reality, Phillips & Drew were left with the bulk of new shares as they had not successfully placed them. If this had been publicly known at the time, the Blue Arrow share pricew would have collapsed.
To cut a long story short, P&D were caught. A number of senior executives were arrested at the P&D offices, handcuffed and taken away.
What followed at the time was the most costly trial in British history.
The Excutives were found guilty.
The Executives then won on appeal on the grounds that the case was too complicated for the jury to understand.
What amazes me is that some of those executives who stood trial are working in finance today, registered and authorised by the FSA (who request that you are a "fit and proper person" )
In order to raise sufficient funds to make this huge purchase, Blue Arrow needed to issue new shares to shareholders in return for their hard earned cash.
Blue Arrow appointed Phillips & Drew (now UBS) to "underwrite" the issue.
Phillips & Drew publicly announced that they had successfully placed all the new shares with various institutions. The Blue Arrow share price remained stable.
In reality, Phillips & Drew were left with the bulk of new shares as they had not successfully placed them. If this had been publicly known at the time, the Blue Arrow share pricew would have collapsed.
To cut a long story short, P&D were caught. A number of senior executives were arrested at the P&D offices, handcuffed and taken away.
What followed at the time was the most costly trial in British history.
The Excutives were found guilty.
The Executives then won on appeal on the grounds that the case was too complicated for the jury to understand.
What amazes me is that some of those executives who stood trial are working in finance today, registered and authorised by the FSA (who request that you are a "fit and proper person" )
