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Corporate FinancePrepared by Dr Khairul Anuar

T2 – The Securities Market

• The amount of equity one holds in a company has nothing to do with being possible to get fired as a CEO. But it does help.

Facebook has two classes of stock:

Class A shares that carry one vote apiece (the same shares you can buy on the stock exchange), and

Class B shares that carry 10 votes per share.

• Zuckerberg has a big percentage of Class B shares and, as a result, controls roughly 60% of the voting power at the company.

• According to SEC Filling: Zuckerberg owns 29.3% of Facebook’s Class A shares, but only around 20% of the company as a whole. That makes this stake worth closer to $13.6 billion rather than $18 billion.

• In addition to that, Zuckerberg owns other types of shares, harder to track. So his total stake is worth more than that.

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Can Facebook Fire Mark Zukerberg?

1. Securities Market

• The securities market is the market for equity, debt, derivatives, and hybrid.

• The debt market, in turn, may be divided into three parts, viz., the government securities market, the corporate debt market, and the money market.

• The derivatives market may divided into two parts, viz., the option market and the futures market.

4. Types of Financial Market

• The financial market may be classified as primary market or secondary market.

• Primary Market: The market mechanism for the buying and selling of new issues of securities is known as primary market. This market is also termed as new issues market because it deals in new issues of securities.

4. Types of Financial Market

• Secondary Market: It deals with securities which have already been issued and are owned by investors, both individual and institutional.

• These may be traded between investors.

• The buying and selling of securities already issued and outstanding take place in stock exchanges.

• Stock exchanges constitute the secondary market in securities.

5. Participants in the Financial Market

• The major participants are the buyers and sellers of securities or the investors and the issuers.

• Financial intermediaries are the second major class of participants in the financial system.

• There are two types of financial intermediaries in the financial system, namely

banking financial intermediaries; and

non-banking financial intermediaries such as insurance companies, housing finance companies, unit trusts and investment companies.


• Another group of participants in the financial system comprises the individuals and institutions who facilitate the trading or exchange process in the system.


• Stock Exchanges: A stock exchange is an institution where securities that have already been issued are bought and sold. The Malaysian stock exchange is called Bursa Malaysia.

• Listed Securities: Securities that are listed on various stock exchanges and hence eligible for being traded there are called listed securities. Presently about 1,000 securities are listed on Bursa Malaysia.

6. What are securities?

• What are securities?

– Definition: a legal representation of the

right to receive prospective future

benefits under stated conditions.

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https://www.theguardian.com/business/2018/oct/03/aston-martin-ipo-flotation-lse

7. The Malaysian Stock Market

• The Malaysian stock market is known as Bursa

Malaysia

• Presently, 925 companies listed on Bursa Malaysia,

represents RM1.47 trillion of market capitalisation

Bursa Malaysia comprises 3 markets:

Main Market

ACE Market

LEAP Market

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8. Recent Notable

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Total Funds Raised

in $2,164 million

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IPOs in Regional Markets in 2012

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9. The 2 Markets on Bursa Malaysia

Bursa Malaysia

Main Market ACE Market

For established

companies with a profit

track record of 3 to 5 full

financial years or

companies with a sizeable

business

An alternative sponsor-driven

market designed for

companies of all business

sectors that have excellent

growth potential

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10. Criteria for Listing on Bursa Malaysia

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Criteria for Listing

Quantitative Qualitative

Operating track record

Profit requirement

Market capitalization

Sustainable business

Business prospects

Quality of management &

directors

Stage of development

Risk management

Corporate governance

11. Quantitative Criteria for Listing

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Quantitative Criteria

Main Market ACE

Uninterrupted PAT of 3 - 5 FY, with

aggregate of at least RM20m

PAT of at least RM6m for the most

recent full FY

Market capitalization of at least RM500m upon listing

No minimum operating

track record or profit

requirement

12. Qualitative Criteria for Main Market

Identifiable Core Business

Good Management

No Conflicts of Interest

Strong Business Prospects

Healthy Financial Position

Good Corporate Governance

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12. Qualitative Criteria for ACE Market

Growth Prospects

Capable Directors and Management

Commitment to Compliance

Responsible Directors

Risk Management

Good Corporate Governance

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12. LEAP Market

LEAP Market is an alternative market for SMEs and

companies to raise funds.

It brings together potential SMEs and companies,

intermediaries and qualified sophisticated investors

onto a single platform to create a conducive

marketplace for fund raising.

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12. LEAP Market

• LEAP Market is a new market offered by Bursa Malaysia which aims to:

provide SMEs and other companies with greater fund raising access and visibility via the capital market; and

be accessible only to sophisticated investors *

* as prescribed under the Capital Markets and Services Act 2007

• The LEAP Market aims to bring together potential issuers, intermediaries and Sophisticated Investors onto a new platform to create a conducive marketplace for fund raising.

• The LEAP Market provides an efficient and transparent capital formation and price discovery mechanisms compared to private market.

• Sophisticated Investors can now have greater opportunities to participate in the growth of SMEs in Malaysia.

• The establishment of the LEAP Market is premised on the following key guiding principles:

Cost-efficient fund raising & listing

Appropriate rules and regulation based on intended SMEs and companies

Qualified Market for Sophisticated Investors 25

12. LEAP MarketCurrently there are 16 companies listed in the LEAP market

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12. LEAP MarketCurrently there are 16 companies listed in the LEAP market

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Listing on the Singapore Stock Exchange:

Mainboard vs. Catalist

• Quantitative requirements

• An applicant to a Mainboard listing needs to satisfy at least one of the

following quantitative requirements:

• (a) PAT of at least S$30 million for the latest financial year, and an

operating track record of at least three years;

• (b) profitable in the latest financial year, have an operating track record

of at least three years, and have a market capitalisation at initial public

offering (“IPO”) of not less than S$150 million; or

• (c) generated operating revenue in the latest completed financial year,

and have a market capitalisation at IPO of not less than S$300 million.

• A Catalist listing does not have quantitative requirements but needs to

appoint a sponsor, who will assess its suitability to list and will advise

and guide the company through the listing process. The company must

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• Operating track record

• A Mainboard listing applicant would

require a three-year operating track record,

unless the listing is based on market

capitalisation of not less than S$300

million. A Catalist Listing does not have

such a requirement.

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12. Qualitative Criteria for LSE –

Aim and Main Market

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13. Ten largest stock exchanges in the world by market

capitalization in 2011:

1. New York Stock Exchange (NYSE) - Headquartered in New York City.

Market Capitalization (2011, USD Billions) – 14,242; Trade Value (2011, USD

Billions) – 20,161.

2. NASDAQ OMX - Headquartered in New York City. Market Capitalization

(2011, USD Billions) - 4,687; Trade Value (2011, USD Billions) – 13,552.

3. Tokyo Stock Exchange - Headquartered in Tokyo. Market Capitalization

(2011, USD Billions) – 3,325; Trade Value (2011, USD Billions) – 3,972.

4. London Stock Exchange - Headquartered in London. Market Capitalization


5. Shanghai Stock Exchange - Headquartered in Shanghai. Market

Capitalization (2011, USD Billions) – 2,357; Trade Value (2011, USD Billions)

– 3,658.

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6. Hong Kong Stock Exchange - Headquartered in Hong Kong. Market


– 1,447.

7. Toronto Stock Exchange - Headquartered in Toronto. Market Capitalization


8. BM&F Bovespa - Headquartered in Sao Paulo. Market Capitalization (2011,

USD Billions) – 1,229; Trade Value (2011, USD Billions) – 931.

9. Australian Securities Exchange - Headquartered in Sydney. Market


– 1,197.

10. Deutsche Börse - Headquartered in Frankfurt. Market Capitalization (2011,

USD Billions) – 1,185; Trade Value (2011, USD Billions) – 1,758.

13. Ten largest stock exchanges in the world by market

capitalization in 2011:

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