Managerial finance, financial markets, financing investments, firms, inter-temporal allocation, cash-flows, companies, manager, entrepreneur, business
- Financing investments (for firms) ;
- Inter-temporal allocation of cash-flows (for consumers/investors) ;
- Risk transformation: risk-diversification and tis-transfer (for firms and investors). Companies are the unit of observation of this course (companies raise capital and invest the funds received).
[...] • Enhance reputation. • Broaden ownership. • Diversification. • Minimize cost of K. • Costs of going public: - Direct costs go K raised): underwriter commission or gross spread, legal fees, auditor fees, printing fees, advertising costs. - Indirect costs: proprietary disclosure costs, management time, underpricing (UP=difference in price between closing price on the 1st day of trading and offer price: (1st day closing price - offer price)/offer price. Considered as ‘money left on the table': No. shares issued x first- day capital gain per share = aggregate dollar value of profits received by investors who were allocated shares at the offer price). [...]
[...] Investors become shareholders of the company. Means of equity financing are IPOs, BAs, VCs, equity, crowdfunding Equity value and earnings —> growth prospects. Equity investors share profits → they look for companies with high demand potential and exponential growth in profits. Key characteristics: • Ability to anticipate market needs by creating a new market demand; • Superior expertise in providing a solution to an existing inelastic market demand (e.g. biotech companies); • Scalability: capability to handle increased market demand (e.g. social network apps). [...]
[...] Lecture T2. Private vs public equity, intermediate vs disintermediated finance Corporations have to rely on external financing whenever internal cash flows are too small to finance new projects. • Private equity = Private equity finance refers to unregistered equity and equity linked securities directly sold by companies to financial buyers. This takes place in private deals, typically with one-to-one or one-to- few negotiations. Examples: BAs (individuals), VCs (raise K and invest in their companies), Family Office (ownership belongs to a single family). [...]
[...] profits (e.g. Exit through: IPO, Uber). trade sales, sales Specificity: to entrepreneurs, business with high or level of bankrupt/liquidati specificity is on. based on unique or hard-to-replicate knowledge (e.g. Genedit). 4 different investor types: 1. IVC, Independent VC (US style limited partnership): relatively high intensity of financial objectives, raise K from institutional investors. Target: companies not in the seed stage with scalable or specific business with the potential of high return in the medium run CVC, Corporate VC, affiliated to a non-financial corporation: relatively low intensity of financial objectives, gain access to advanced technologies. [...]
[...] As a manager/entrepreneur, how do you finance your business? Focus on Security markets = fungible (property of a good or a commodity whose individual units are capable of mutual substation), negotiable instruments (specialized type of contract for the payment of money that is unconditional and capable of transfer by negotiation) representing financial value. Theory Course: 1. Debt vs equity decision 2. Private vs public equity, intermediated vs desintermediated finance 3. Independent & Captive Venture Capitalists Family Offices 4. Business Angels (BAs) 5. [...]
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