Essays on Financial Markets and Institutions Assignment

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The paper "Financial Markets and Institutions" is a wonderful example of an assignment on finance and accounting. Tabcorp Holdings Limited's idea to demerge may be very effective with the utilization of the bookbuild sale method. This can be done in the case where Tabcorp has offered a pro-rata entitlement offer that further splits into institutionalized and retail entitlement offers. There are other fundraising methods that are available for Tabcorp. These include the placement of shares to institutional shareholders or the use of a share purchase plan. The ‘ accelerated renounceable pro-rata entitlement offer’ is a funding structure developed through Renounceable Accelerated Pro-rats Issue with Dual- book build structure (RAPIDS).

An entitlement offer can be divided into two components. These include an institutional entitlement offer and a retail entitlement offer. With an institutional entitlement offer, offers are made to those security holders within an institution who have qualified to make an application for their pro-rata entitlement. On the other hand, with a retail entitlement offer, offers are made to those security holders who have qualified for retail by making an application for their pro-rata entitlement.

Settlement and allotment of the shares taken under the institutional or retail entitlement offer and bookbuild are done at the same time. There are advantages and disadvantages of accelerated renounceable pro-rata entitlement offer (Anonymous, 2006). One advantage is that through this structure if the shareholders (investors) fail to participate in the entitlement offer, they are allowed to realize value for their entitlements. This is because if in case the shareholders (investors) failed to take their entitlement, even after having their percentage interest diluted they would not receive any value for owning up such entitlement.

Another advantage is the fact that this structure enables the company, for example, Tabcorp to acquire a huge amount of its funds within a shorter time period under the entitlement offer compared to the previous methods such as Accelerated Priority Offer (APO). With this structured settlement of institutional entitlement offer and bookbuild occurs slightly over a week after the offer has been launched. In addition, investors of Tabcorp are not required to pay any brokerage fee in order to realize value for their investment through the accelerated renounceable pro-rata entitlement offer.

References

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Understanding International Investment and Money Flows, Kogan Publishers.

Dunn, James 2011, Share Investing for Dummies, 3rd Ed, For Dummies.

Fan, Q. 2007. Earnings Management and Ownership Retention for Initial Public Offering

Firms: Theory and Evidence: The Accounting Review, Vol 82, Issue 1, pp27-64.

Greg, N.G. 2006. Initial Public Offerings: An International Perspective,

Butterworth-Heinemann.

Lock, D 1998, The Gower Handbook of Management, 4th Ed, Gower Publishing Company.

Nikolai, L.A., Bazley, J.D & Jones, J.P 2009, Intermediate Accounting, 11th Ed,

Cengage Learning.

Walmsley, J 1998, New Financial Instruments, Wiley Publishers.

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