Market Mechanisms

Market mechanisms

IPO (Initial Public Offering) primary offering of shares (the company enters the stock market for the first time) Secondary offering additional offering of shares (the company is already public, issues more shares) Private placement sale of shares/bonds to selected investors (not everyone) SPAC (Special Purpose Acquisition Company) shell company that acquires a real business (faster IPO) Direct listing company goes public directly, without IPO (shareholders and company are immediately traded) Dual listing listing on two exchanges simultaneously ADR program American Depositary Receipts of a foreign company Rights issue issuance of new shares to existing shareholders with the right to purchase Tender offer offer to buy shares at a price above the market (for takeover) Buyback / Share repurchase company buys its own shares Dividend reinvestment plan (DRIP) dividends are automatically invested into new shares Stock split / Reverse split splitting shares (1 → 2) or consolidating (2 → 1) Spin-off a subsidiary becomes a separate company and shares are distributed Carve-out sale of a subsidiary to a third party Merger the combination of two companies into one Acquisition purchase of one company by another LBO (Leveraged Buyout) acquisition of a company using debt (financed by its cash flow) MBO (Management Buyout) management buys the company Hostile takeover takeover of the company against the board's wishes White knight / White squire friendly investor, rescuing from hostile takeover Poison pill defense against takeover (allows shareholders to buy many new shares cheaply during takeover) Golden parachute contract where a manager receives a large payout if fired after a takeover