Question

QUESTION 4: (a) Briefly explain the process of launching an initial public offer of a new company that is now listing on the Ghana Stock Exchange.

b) What are three main functions of the investment bank in the IPO process?

c) What are three main differences between bonds and common shares or stocks?

d) What are three main differences between ordinary and preferred shares?

Answer 1

a) In simple words, An initial public offer belongs to provide the shares of a company to the public to get new capital investment.

The launching of an initial public offer of a new company that is now listing on the Ghana Stock Exchange is as follows:

• The shareholders adhere to switch from a private company to a public one limited by shares.
• With the advice of outside attorneys or inside attorneys, the company develops new company arrangements that agree to that of the Companies Code and also satisfy the listing conditions of the Ghana Stock Exchange.
• The Ordinances reviewed with the Ghana Stock Exchange and, if decided competent, then filed with the ROC.
• The company's representatives will also have to designate a team of advisors to advise the company to develop its offer document. The group includes accountants, brokers, attorneys, financial valuation advisors.
• The reports of the advisors reviewed. The shareholders will exercise relevant resolutions.
• A request to list on the Ghana Stock Exchange will have to be submitted; the outline of the public offer prospectus needs to present to the Securities and Exchange Commission for permission.
• A date will set for the launch of the public offer.
• After the public offer, by getting a minimum subscription, apportionment is made.
• The company then admits on a date for the start of trading its shares on the Ghana Stock Exchange.

Recently published shares cannot trade in Over-The-Counter. To get newly released shares listed on the Ghana Stock Exchange, the company needs to deliver this plan early to the Ghana Stock Exchange.

b) Functions of the investment bank in the IPO process:

1. The investment bank assists in underwriting.
2. The investment bank acts as a broker between investor and issuer.
3. The investment bank provides an investment banking function where the company utilizes an investment bank to issue an initial public offer.
4. The investment bank accomplishes the financial design of IPO in the underwriting contract.

c) Differences between bonds and common shares or stocks:

	Bond	Stock
Federalization	Bond markets do not have a centralized exchange.	Stock or share markets have a stock exchange.
Owners	They are known as bondholders	They are called shareholders
Issued by	Issue of bonds done by public sector authorities, credit institutions, and companies.	Stocks issued by companies.
Characteristic	Bondholders are lenders to the company	The stockholders have a part of the issuing company. They are the owners of the company.
Risk	Relatively low risk	High risk
Return	Interest, which is guaranteed	The dividend, which is not guaranteed
Voting power	They have no right to vote in the company's resolutions.	Have a right to vote in the meetings

d) Differences between ordinary and preferred shares:

	Ordinary shares	Preferred stock
Voting power	They have voting rights in meetings.	They don't have any voting power.
Priority in payment	They don't have any priority in payment.	They have priority in payment as lenders paid off; then, they will get preference in payment.
Dividend	Ordinary shareholders may or may not get dividends.	Preferred stockholders always get dividends.
Arrears	They don't get arrears paid	They get arrears paid in a later year.
Growth	High	Low

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