Block P · Corporate finance & primary market

‹ Financial markets handbook: overview

Independent working reference. Product and feature names mentioned are trademarks of their respective owners. No investment advice.

The primary market is the interface between companies and capital; whoever knows the issuance mechanics understands price anomalies and vested interests.

188 · IPO process & bookbuilding

Definition: Going public: selection of the syndicate banks, prospectus, roadshow, price range, order book (bookbuilding), allocation, greenshoe (over-allotment option for stabilization).

Use: Assessing subscription decisions and price behavior after the first listing (lock-ups!).

Interpretation: Underpricing is intentional (a subscription incentive); many IPOs still underperform over the long term.

Typical mistake: Not having lock-up expiry dates in the calendar.

189 · Capital increases & subscription rights

Definition: Issuance of new shares; with subscription rights (anti-dilution protection for existing shareholders, subscription ratio + subscription price) or with rights excluded (up to 10-20% common).

Use: Managing subscription rights actively: exercise, sell; never let them lapse.

Interpretation: TERP (theoretical ex-rights price) is the calculation basis; the price markdown is mechanics, not a loss.

Typical mistake: Letting subscription rights lapse unnoticed; a real loss of wealth.

190 · Bond issuance (syndication, pricing, new issue premium)

Definition: New issue via a bank syndicate: mandate, investor calls, order book, spread guidance down to the final spread; the new issue premium (NIP) = pickup over the secondary curve.

Use: The NIP as a return source for existing investors; order book dynamics (oversubscription) as a demand signal.

Interpretation: Guidance is tightened on strong demand; the final NIP is often smaller than the initial one.

Typical mistake: Subscribing without comparing against the issuer's own secondary curve (RELS!).

191 · M&A basics

Definition: Takeovers/mergers: strategic vs. private equity, cash/share offer, premium, mandatory offer from 30% (Germany), squeeze-out.

Use: Assessing takeover speculation and offer situations in the portfolio (accept? hold?).

Interpretation: The arbitrage spread between price and offer price reflects completion risk (antitrust, financing).

Typical mistake: Judging offers without looking at minimum acceptance thresholds and top-up rights.

192 · Company valuation (DCF, multiples)

Definition: DCF = present value of future free cashflows (WACC as the discount rate, terminal value); multiples = valuation relative to peers (EV/EBITDA, P/E).

Use: One's own idea of the price instead of market faith; sanity-checking price targets.

Interpretation: DCF is assumption-driven (the terminal value dominates); compute it as a range, never as a point value.

Typical mistake: False precision; two decimal places with 10% assumption uncertainty.

See also: 95 · P/E ratio · 98 · EV/EBITDA

193 · Leveraged finance & private placements

Definition: Debt financing of buyouts (leveraged loans, HY bonds, unitranche) and non-public placements with selected investors.

Use: Understanding the capital structure beneath one's own bond; access to private debt paper.

Interpretation: Covenant-lite documentation shifts risks to the creditor; read the documentation (or have it read).

Typical mistake: Comparing private placement yields without an illiquidity and documentation discount.

194 · Schuldschein loans

Definition: A German instrument between loan and bond: a bilaterally documented loan, not exchange-listed, often used by mid-sized companies and states/municipalities; a buy-and-hold market.

Use: Yield pickup for illiquidity; diversification in the rates book of institutional investors.

Interpretation: No market price: valuation is model-based; sale before maturity only possible to a limited extent.

Typical mistake: Treating Schuldschein loans like bonds in liquidity planning.

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