How To Write An Acquisition Profile
limited companies, no. However, a public limited company must have an authorised share capital of at least £60,000 (and, if it is trading, issued capital of £60,000)., but most have a far larger sum.
The maximum amount is given in the company's memorandum of association and is known as the 'authorised share capital'. SEE ttp://www.completeformations.co.uk/companyfaqs/shareholders/issuing_shares.html
The amount of share capital which has actually been issued is known as the 'issued share capital'. Often these amounts are the same, but the issued share capital can be less.
The amount of par value which has actually been paid is known as the 'paid-up share capital'. If there are no partly-paid shares in issue, the paid-up share capital is the same as the issued share capital.
The process by which shares are issued is known as subscription. The investor 'applies'for shares at an advertised price. (Sales by tender are discussed below.) It would be a remarkable coincidence if the applications exactly matched the shares available, so an issue is said to be either oversubscribed or undersubscribed.
If undersubscribed, the underwriters purchase the unsold shares. If no underwriting arrangement has been made, or the arrangement is insufficient, the issue has failed and the shares may not be legally issued.
If oversubscribed, the company either holds a ballot or gives the investors a portion of what they asked for, or both. The issue of TSB shares was so heavily oversubscribed that they had to do both. It should be stated that there is much tactical application in issues which are expected to be oversubscribed. For example, if you want 500 shares in X plc but you think it might be oversubscribed five times, you can apply for 2500 shares in the hope of getting the 500 you want. The risk is that you will be allocated more than 500 which you may not be able to accept and consequently lose your right to buy the shares at all.
The fact that a share issue is oversubscribed 27 times does not necessarily mean that investors wanted 27 times as many shares as were available! Facebook’s recent IPO was the opposite with too many shares being issued and not enough buyers. Dreamers who thought that the share offer would be oversubscribed (and hence push the initial offering price of skyhigh) did not occur. Facebook may have the traffic, but little revenue.
Sometimes shares are offered 'for tender'. This means that as well as saying how many shares you want, you also say how much you are prepared to pay. Assuming that the issue is oversubscribed, the issuing house then finds the price at which, and above which, enough investors have tendered for all the shares to be issued. This is known as the 'striking price'and is paid by all investors, even though they may have tendered a higher figure. Those who tendered a lower figure receive nothing. Virgin was successfully floated by a tender offer.
The process by which shares are matched to investors is called allotment. You receive a letter of allotment, telling you how many shares have been allotted to you and how much you have to pay.
The letter of allotment will be either 'renounceable'or 'provisional'. If it is renounceable (as is usual for rights issues), you have a short time (often six weeks) in which you may sell your letter of allotment. If you neither take up your allotment nor sell your right to do so, the allotment lapses. A provisional allotment may either be accepted or rejected within the stated time limit. It cannot be sold.
You become the legal owner of the shares when you take up your allotment. The share certificate may take a little while to be prepared and sent to you.
From any time when you become the legal owner you can sell them, even if you have not received the share certificate.
Even before the shares have been allotted to you it is possible to sell shares on what is known as the 'grey market'. This is very risky, however, because if you have sold shares which are not allocated to you, you can be forced to buy the shares on the open market, probably at a subst
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