Capital Markets Fundamentals
In this session participants will cover the main functions of the capital markets. Most importantly, the key players, banks and investors are covered in detail. Participants will then examine the life of a corporate and review the funding options.
- What financial markets do?
- Who are the major players?
- Domestic and international capital markets
- Debt versus equity
- Primary versus secondary market
- Distinguishing between retail, corporate and investment banking
- Buy side versus sell side
- League tables, equity underwriting
- Where transactions take place: Exchanges vs. OTC vs. ECNs
- The buy-side industry/investors
- Active vs. passive investment management
- Asset allocation
Equity Capital Markets (ECM)
In this session we introduce equity markets and products. We will drill down on the characteristics of equity and equity valuation. We will introduce the life-cycle of equities. We will also look at the differences between primary and secondary shares and primary and secondary markets, including motivations of investors.
- Company life cycle, pros and cons
- Primary vs. secondary markets
- What is an IPO, a secondary offering?
- What are primary shares, secondary shares?
- Equity markets and trading systems
- Criteria for admission and voting rights
Initial Public Offerings (IPO)
This session focuses entirely on the characteristics of IPOs. We will focus on analysing the Facebook IPO.
- Origination and execution
- Syndicate desk
- Sales team
Banking roles (bookrunner, manager, underwriter) and fees
Best efforts vs. underwriting
International offerings vs. Dutch auctions
Steps in equity offerings
- Share allocation
- Price stabilisation mechanism
What are the criteria of a successful IPO from vendors and banks viewpoint
Case study: Detailed analysis of the Facebook IPO
During the final session of our training, we will focus entirely on the characteristics of the different type of offerings available following the Initial Public Offering. We will analyse the Barclays right issue in detail.
- The need for re-capitalization and follow-on placements, including private placements and rights issuances as alternatives
- ABBs (Accelerated book build)
- Rights issues
- Process and recent market deals
- Pros and cons of various processes
Case study: Detailed analysis of the Barclays rights issue
Equity Valuation and IPO Pricing
During this last session, we will discuss the main equity valuation methods to derive a price for the equity offering.
- Determining fair value of the equity for an IPO
Trading comparables and discounted cash flow analysis (DCF)
Discount to fair value in the primary market
Value range and decision on final pricing for allocation
Trading comps as the main driver
- Enterprise Value vs. equity multiples
- Lack of cash flows and valuation methods
The five steps of DCF
- Free cash flow and terminal value
- Weighted average cost of capital and discounting
- From Enterprise Value to Equity Value
- Pre-money and post money valuation
- Earnings per share accretion and dilution
Case study: Valuation of a recent IPO