Financialinstruments金融工具.ppt

3 FINANCIALMARKETSANDINSTRUMENTS Financialmarkets instruments BusinessesraisemoneytofinancecurrentoperationsaswellasforfuturegrowthMoneyisraisedInfinancialmarkets capitalmarketsandmoneymarkets Byissuingfinancialinstruments alsocalledsecurities whichgivetheholdersclaimsonfuturecashflowsofthebusiness 2 Financialmarkets Financialmarketsdescribesthedistributionsystembywhichcash deficitentitiesengageintransactionswithcash surplusentities Besidesbusinesses participantsincludegovernmentagencies pensionfunds endowments individuals commercialbanks insurancecompanies RegulatedbySecurities ExchangeCommissionCapitalmarketsdealwithlongterminstrumentslikestocksandbondswhilemoneymarketsdealwithshort terminstrumentswithmaturitylessthanoneyearsuchascommercialpaper 3 Financialinstruments Instrumentsmustappealtoinvestorsandmeettheneedsofthecompany TheyaredesignedkeepinginmindInvestors claimsonfuturecashflowsInvestors righttoparticipateincompanydecisionsInvestors claimsoncompanyassetsintheeventofliquidationSECregulationsrequireadequatedisclosurebeforepurchase 4 Typesofinstruments Debtinstrumentsofferfixedclaims Equityoffersresidualclaims Hybridssuchasconvertibledebtcombineboth Derivativessuchasforwards futuresandoptionsprovideahedgeagainstrisk 5 BONDS Fixedincomesecurity interestpaidperiodicallyRepaymentofprincipalatmaturity Bondsaresoldtothepublicinsmallincrements suchas 1000 andcanbetradedonanexchangeafterissue Yield returnwithreferencetomarketprice inverselyrelatedtomarketprice 6 Bondcharacteristics ParvalueMaturitydateCouponrateCurrentyieldvs yieldtomaturity YTM SinkingfundforperiodicrepaymentofprincipalVariableratevs fixedratebonds 7 CallProvisions提前赎回条款 Righttoretirebondspriortomaturity Investorsrequireapremiumforcallprovisions Callpriceistypicallyamodestpremiumabovepar Delayedcallpreventsretirementbeforesomedate Calloptionshelpcompaniestakeadvantageofdeclinesininterestratesandrearrangecapitalstructure 8 Covenants契约 Contractualtermstoprotectbondholdersbyimpactingmanagementdecisions Examples LowerlimitoncurrentratioUpperlimitonD EratioRequiredapprovalbybondholdersbeforemajoracquisitionorsaleofassetsBondholdershavenodirectsayinacompanyunlessitdefaultsonitsinterest sinkingfund orcovenantobligations 9 RightsinLiquidation清偿权利 RightsofabsolutepriorityGovernmentinrespecttotaxespastdueSeniorcreditorsGeneralcreditorsSubordinatedcreditorsPreferredshareholdersCommonshareholders 10 SecuredCreditors Securedcreditinvolvescollateral Inliquidation proceedsfromthesaleofcollateralonlygotothesecuredcreditoruptotheamountofthesecuredcredit Anyresidualgoesintothepoolsharedbytheotherinvestors Ifthesaleofcollateralisinsufficient thesecuredcreditorbecomesageneralcreditorforthebalance 11 Bonds Issuer sperspective Advantages LowercostoffundsInterestistaxdeductibleNolossofcontrolDisadvantages InterestpaymentmandatoryRedemptioncashoutflows 12 Bonds investor sperspective Fixedincome nocapitalappreciationConvertiblebondsseektoprovidebothRisk returntradeoffLesserriskthanequity lowerreturnsAnnualizedreturnsover10yrsforBarclaysBondIndex 7 6 vs S P500 10 4 AlsoreferTable5 1Realvs nominalreturnsir 1 in 1 p 1whereir Realreturn in Nominalreturn p Inflationrate 13 TABLE5 1RateofReturnonSelectedU S Securities1900 2007 14 Bondratings ExpressionoftheopinionoftheratingagencyonthecreditworthinessoftheborrowerMeasurescreditrisk defaultriskCreditratingagencies S P D B Moody sAAA HighcreditworthinessBBB AdequateCCC PoorD DefaultBondratingsandinterestrates 15 JunkBonds Investmentgradeis BBB andabove Junkbondsarespeculativeorhighyieldbondsandarebelowinvestmentgrade Junkbondmarketisanalternativetobankandinsurancecompanyloansforsmaller lessprominentcompanies Junkbondshavebeenusedtofinancemergersandacquisitions 16 EQUITYorCOMMONSTOCK ResidualincomesecuritiesRepresentownershipsecurities proportionatetoshareholdingRighttocontrol VotingrightsShareholdersarerepresentedthroughaboardofdirectors throughwhichtheyexercisecontrol Rightinliquidation residualclaimoverassetsRiskierthandebtinstruments 17 Riskandreturn Whatistheexpectedrateofreturnonequity Rateofreturn Dividendyield capitalappreciation Div Mktprice changeinsharepriceRisk returntradeoff Highertheriskinaninvestment highertheexpectedreturnsEquityinvestorsexpectariskpremiumtocompensatefortheenhancedriskSoreturnonequity Riskfreerate RiskpremiumRiskfreeratetakenasGovt BondrateRiskpremium Table5 1 11 6 5 3 6 3 18 Commonstock contd Advantagestoinvestor Higherreturnsthandebt Liquidity WealthsharingDisadvantagestoinvestor Higherrisk Dividendpaymentnotmandatory 19 Commonstock contd Advantagestoissuer Dividendpaymentnotmandatory Noredemptioncashoutflows HigherequitymeansbetterborrowingabilityDisadvantages Costliersourceoffundsthandebt Dilutionincontrol Dividendsnottaxdeductible unlikeinterest 20 Anoteonretainedearnings Readilyavailablesourceoffundsinternally internalequity NoissuecostsNodilutionincontrolReflectstherobustnessofcompany shealthandreducesdependanceonoutsidefundingTheonlypointtoberememberedisthatretainedearningsalsohasacostintermsofopportunitycosttoinvestors 21 HigherpriorityovercommonstockholdersinpaymentofdividendsandinrepaymentofcapitalAnnualfixeddividendatcouponratexparvalueDividendisdiscretionaryCumulativedividendsfeatureDividendnottaxdeductibleforissuerNovotingrightsexceptinmatterswhichconcernthem PREFERREDSTOCK 22 Preferredstock contd Totheinvestor Lesserrisk butlesserreturnsandlessliquidthancommonstockTotheissuer Lessercost dividendpaymentnotmandatory butnottaxdeductible nolossofcontrol 23 MARKETCHANNELS MarketChannelsforraisingfundsPrivateequityVenturecapitalInitialpublicoffers IPOs andseasonedequityissues SEOs ShelfregistrationPrivateplacementInternationalmarkets 24 PrivateEquityFinancing Sourceoffundsforstartups neworsmallbusinessesviewedastooriskyforbanklendingandtoosmalltoattracttheattentionofinvestorsinpublicmarkets Fundingdonebystrategicinvestors venturecapitalfirmswhoprovideseedmoneywithpotentialacquisitionontheirminds 25 PrivateEquityPartnerships Structuredaslimitedpartnershipswithaspecifieddurationsuchas10years Generalpartneristheprivateequityfirm whichraisesapoolofmoneyfromlimitedpartners suchasinstitutionalinvestorsandinsurancecompanies Limitedpartnershavelimitedliability Typicalfeestructureis2and20 thesumofamanagementfeeand carriedinterest basedoncapitalappreciation Inducemanagerstocreatevalueoverlongrun 26 Venturecapital Aventurecapitalcompanyisafinancinginstitutionwhichjoinsanentrepreneurasaco promoterinaprojectandsharestherisksandrewardsoftheenterprise Projectsaregenerallyhighriskwithpotentialhighrewards Soughtbynew untriedbusinesseshavinglittle noaccesstopubliccapital bankloans 27 Venturecapital features Longtermequityfinance highstakes Returnsthroughcapitalgainsatthetimeofexitbysellingoutequityholdingsathighpremiums Selective generallyseekaboveaveragereturns Generallyfinancingofnew untriedtechnology new notrackrecordpromotersNotonlyfinancingbutalsoactiveroleinmgmt Mediumtolongterminvestmenthorizon Incentivestopromotersonperformance 28 Exitroute GoingpublicSaleofsharestopromoter Saleofcompanytoanothercompany managementbuyinorbuyout Sellingtoanewinvestor Liquidation 29 FIGURE5 3VentureCapitalInvestmentinU S Companies 30 InitialPublicOfferings IPOs WhencompaniesraisecapitalforthefirsttimebyissuingnewsharesSeasonedequityofferings SEOs refertoissueofnewsharesbyacompanythatisalreadypubliclytraded alreadymadeanIPO Companyassessesproposalsfrominvestmentbanksandchoosesone managingunderwriter 31 IPORisks ManagingunderwriteradvisesthecompanyonsecuritydesignregisterstheissuewiththeSEC 30 90days orchestratesa roadshow assemblesanunderwritingsyndicatewhoengageinbookbuildingSyndicateactsaswholesaler Offerpricesethoursbeforestockgoespublic Companybearspriceriskduringtheregistrationprocess syndicatebearsriskassociatedwithunsoldshares whichtheycannotsellabovetheofferprice 32 Shelfregistration Shelfregistrationisageneralpurposeregistrationgivingbroadtermsofthesecuritiestobeissued gooduptotwoyears thatallowsthefirmtogetquickapprovalAsingleunderwriteroftenbuystheentireissue CutsthetimelagfromseveralmonthstoafewdaysCompetitivebidslowertheissuecosts 33 PrivatePlacement CorporationscanavoidregisteringwithSECbyplacingthesecuritiesprivatelywithinstitutionalinvestors Theprivateplacementmarketisabouthalfthesizeofthepublicmarket excludingbankloans Attractiveoptionifpublicinvestorsnotespeciallyreceptiveforreasonsofcomplexity Advantagestocompanyarequickerandeasiertonegotiate canbecustomtailoredtospecificneedsDisadvantageisthatasunregisteredsecuritiestheycannotbetradedonfinancialmarkets lessliquidRule144Anowallowsfortradingofprivatelyplacedsecuritiesamonginstitutionalinvestors 34 IssueCosts Forprivatelynegotiatedtransactions issuecostamountstotheinvestmentbankingfee Forpublicissues therearealsolegal accounting andprintingfees Costcomparisons2 2 forstraightdebt 3 8 forconvertiblebonds 7 1 forsecondaryofferings 11 forIPOs 35 Comparison 36 EfficientMarkets IssuesinraisingnewcapitalTimingPricingMarketefficiencyiswithreferencetohowquicklypricesincompetitivemarketsrespondtonewinformationEfficientmarketisonewherepricesadjustrapidlytonewinformationandcurrentpricesfullyreflectavailableinformation 37 EfficiencyinDegrees Amarketisweak formefficientwhenpricesfullyreflectallinformationaboutpastpricesSemi strongformefficientwhenpricesfullyreflectallpubliclyavailableinformationstrongformefficientwhenpricesfullyreflectallinformation publicorprivate 38 Empiricalevidence implication Marketsarenotstrongformefficient Withlimitedexceptions marketsaresemi strongformefficientandhencePubliclyavailableinformationhasnopredictivepowerinrespecttomarketprices Typicalinvestorsshouldnotexpecttoearnabnormalreturnstradingonpubliclyavailableinformation Itispointlesstotimethepurchaseorsaleofthefirm ssecurities 39 ConclusionstoDraw Apartfrommarketsentiment managerscanuseprivateinformationabouttheirowncompaniesinmakingtimingdecisions PricingdecisionsinpracticearebasedonMarketvalueFairvaluePricediscoverythrobookbuilding 40 ManagingRisk RiskisdefinedasthevariabilityofreturnsfromtheexpectedvaluesInfinancialmarketsvolatilityresultsinriskCompaniesusederivativestomanageriskandincentivizemanagers Derivativesincludeforwards futures optionsSocalledastheirvalueisderivedfromthatoftheunderlyingassetswhichcouldbeshares currency commodities 41 Forwardcontracts Youcanbuyinspotmarkettodayforimmediatedelivery spotcontract Youcancontracttodayatapredeterminedpriceforfuturedelivery forwardcontract Bylockingina