To pass this unit (requires a Standardised Numerical Grade of 50 or better) the student must pass the final examination.

CLASSES

Face-to-Face Teaching: Generally 20 hours

Timetable: Detailed timetable for classes are on the Centre’s web site www.mafc.mq.edu.au

Consultation Times: 

Students who wish to contact any of the teaching staff may do so through:

• The Unit’s iLearn site, in relation to general queries (so that all students may benefit); or 
• Individual consultation with the lecturer by email in the first instance, if necessary.

REQUIRED AND RECOMMENDED TEXTS AND/OR MATERIALS

Text: Nil

Additional Readings: 

• Additional readings are available on iLearn.
• Students should assume these readings are examinable unless otherwise advised.

Lecture Notes: Available in printed form and electronically via iLearn. 

Pre-Unit Materials: Information papers on statistics, regression, accounting and other material may be found at http://www.mafc.mq.edu.au/applications/minimum-knowledge-requirement/pre-course-materials1/. Students should work through this material prior to commencing the degree.  The material will remain a useful reference as students progress through the program.

Useful References: ASX Listing Rules, Consultation Papers and Exposure Drafts.

Calculators:

• A financial calculator that can handle time value of money calculations, logs and power functions is required.
• The Hewlett Packard calculator hp17bII+ is recommended.
• In examinations, hand held calculators are permitted. Mobile phones and computers are not permitted.

Assumed Knowledge:

• An understanding of valuation concepts and of financial reports is assumed. The unit has both qualitative and quantitative aspects to it. The key areas for financial analysis are financial assessment of the performance of companies and the practical application of valuation principles.
• Students should look at the Web link below to obtain notes on the minimum mathematical and statistical knowledge required to undertake the Master of Applied Finance degree: http://www.mafc.mq.edu.au/applications/minimum-knowledge-requirement/pre-course-materials1/

Assumed Access:

• Access to a computer with word processing and spreadsheet capability, email software and your own connection to an internet service provider are assumed.
• General student computer literacy is also assumed.

TECHNOLOGY USED AND REQUIRED

Unit iLearn Site: 

• Found by logging on to iLearn ilearn.mq.edu.au, then clicking on Equity Capital Markets.
• This is where you will find forums, downloadable resources and links to important pages. 
• The forum allows you to communicate with other students and lecturer(s) and may provide supplementary material. 
• You are requested to post your questions on the forums at least 24 hours prior to the assignment submission date or the examination date. Questions posted after that time may not be answered. Please try to not leave your questions to the last few days. 

Important Notice: 

• It is important that you familiarize yourself with the Unit’s iLearn site. 
• Students should check the Unit’s iLearn site regularly (minimum twice a week and prior to all lectures) and look for updates and distribution of materials (including case studies) related to the unit or assessments and, if relevant, participate in forum discussions. 

MATERIALS

Topics: 

• Lecture Slides
• ASX Listing Rules – Chapters 1, 2, 7, 9 & 11
• ASIC Policy Statements – 56 Prospectuses, 170 Prospective Financial Information, 173 Disclosure for on-sale of securities and other financial products
• ASIC Share Purchase Plan class order
• ASX Guidance Note – 12 Changes to Activities
• ASX paper on capital raisings during the Global Financial Crisis
• ASX consultation paper on new rules and timetables for capital raisings
• ASX IPO brochure
• Takeovers Panel Guidance Note 17
• IPO Share Offer Document – Nine Entertainment Company, Dick Smith Holdings, Collins Foods
• Rights issue case study – Billabong International Limited
• Hybrid announcement, presentation and terms – AGL Limited

INTRODUCTION TO ECM

Topics: 

• Basic Concepts
  • Practice versus Theory
  • Basic Disciplines - Numeracy, Legal, Regulatory, Market Awareness, Project Management
  • Access to Capital and the Power of Balance Sheet
  • Debt versus Equity – Scrip as a Currency
  • The Issue – the Chairman, Company Secretary, Finance Director
  • The Main Players – Accountants, Solicitors, Valuers, Experts, Corporate Advisors, Stockbrokers (corporate, research, distribution)
  • Types of Investors – Retail, Superannuation Funds, Investment Management Funds, Hedge Funds, Speculators and Ethical Funds
  • Risks and Traps
• Technical Aspects and Documentation
  • The Pitch, including Capability Statement
  • Mandate Letter: Fees, Warranties, Restrictions, Timetable, Rights of Sponsor or Underwriter
  • Underwriting, and Sub-Underwriting Agreements
  • Investor Acceptance and Conditional Acceptance
• Valuation Concepts
  • Yields, Price to Earnings, Pay-Out Ratios, EBITDA multiples, Franking
  • Historical versus Prospective Forecasts
  • Role of DCF Analysis

PRIMARY ISSUANCE

Topics: 

• Initial Public Offerings
  • Why List?
  • The Role of Seed Capital
  • The Assets and/or Profits Test
  • The Mature Business versus a Start-Up Business
  • Excluded versus Public or Retail Offerings (assets or income test/accountant’s certificates), The Basic Rules < 20 Shareholders, $500,000 <etc
  • Qualities of a “Good” Offering e.g. Fundamentals, Quality of the Share Register, Share Structure, Escrow, Alignment of Interests, the Free Float, Liquidity, a Competent Board, Potential for Index Inclusion, Managing Expectations
  • Underwriting or Sponsorship-Role of the Lead and Co-Managers
  • Prospectus Content, Procedure, Lodgment & Supplementaries
  • Due Diligence and the DD Defense
  • Forecasts
  • The Transaction Timetable
  • The Pathfinder Prospectus
  • Documentation, Marketing (what you can and can’t say) and the Road-Show
  • Lodgment and Electronic Prospectuses
  • Loyalty Schemes e.g. Options
  • Research and ASIC Guidance – the “Quiet” Period
  • Pricing – the Vend, Discounts, Technology Companies etc
  • Role of the Independent Expert
  • Book Builds, Dutch Auctions etc
  • Priority Entitlements and Allocation
  • Market Stabilisation and Greenshoes
  • CASE STUDY – QR National Limited, Collins Foods

SECONDARY MARKET ISSUANCE

Topics: 

• Placements
  • Secondary Market Raisings – Strengths and Weaknesses
  • Strategic Issues – Timing, Pricing, Cornerstones, Disclosure etc
  • When a Prospectus is Required?
  • The 15% Rule and Exceptions to it
  • On Selling Issues (s. 708) and Cleansing Statements by the Company
  • Continuous Disclosure, Trading Halts and Suspension
  • Spin-Outs
  • Documentation – Appendix 3B etc
• Rights Issues
  • Underwriting
  • Timetable
  • Short Form Prospectus
  • Pricing and Structure
  • Change of Control Issues
  • The Role of the Small Shareholder
  • Renounceable or Non-Renounceable
  • Case Study – Billabong International
• Back-Door Listings
  • Characteristics of a “Clean” Shell
  • Primary or Secondary Market Raising?
  • Change of Scale and/or Change of Activity
  • Motives – Existing Board and Shareholders, the Vendor (Spread and Minimum Parcels, Liquidity, Access to Capital, Reduced Cost)
  • Role of the Pathfinder Prospectus
  • Prospectus Requirements
  • Voluntary escrow (notification)
  • Shareholder Approvals
  • Related Party Transactions
  • Ordinary and Special resolutions at EGMs
  • Summary: Advantages and Disadvantages
  • CASE STUDY – Vocus Communications Limited
• Share Purchase Plans (SPPs)
  • Advantages & Disadvantages
  • Timing, Pricing, Underwriting, Documentation
  • Limitations
• Dividend Repurchase Plans (DRPs)
  • Documentation
  • Pricing
  • Underwriting
• Convertibles and Hybrids
  • Listed or Unlisted
  • Terms and Conditions
  • The Role of the Trust Deed
  • CASE STUDY – AGL Limited

CAPITAL MANAGEMENT

Topics: 

• Share Buy-Backs
  • Pro-Rata Return
  • On-Market
  • Off-Market-Equal Access
  • Off-Market-Selective Access
  • Legal and Tax Issues
• Dual Listings
  • When to Go?
  • The Role of Sponsors
  • Cost/Benefit Analysis
  • Offshore Exchanges
  • Capital Transfer Mechanism
  • ADRs in Detail
  • Measures of Success

​

This Unit Guide may be subject to change. The latest version is on the Centre’s web site www.mafc.mq.edu.au.

Students should read the Unit Guide carefully at the start of semester.  It contains important information about the Unit.  If anything is unclear, please consult one of the unit lecturers.  

University Policy on Grading:

• Macquarie University’s Academic Senate has established a Grading Policy available at http://www.mq.edu.au/policy/docs/grading/policy.html. Your final result will include: 
  • A grade ranging from Fail to High Distinction; and
  • A Standardised Numerical Grade (SNG). A SNG is not a summation of the individual assessment components, but is allocated on the basis of the performance in all assessment items, providing the examination component is passed.
• It is important to note:
  • The Policy does not require that a minimum or maximum number of students are to be failed in any unit; 
  • Grades will not be allocated to fit a predetermined distribution; and
  • The process of allocating SNGs does not change the rank order of marks among students who pass the unit. 

Specific Unit Grading: 

• To pass this unit (requires a Standardised Numerical Grade of 50 or better) the student must pass the final examination.
• All final grades in the Applied Finance Centre are determined by a grading committee and are not the sole responsibility of the unit convenor.
• The core criteria used to assess student work in this unit are: 
  • Knowledge and understanding: Understanding key ideas, knowledge and use of concepts.
  • Application: Ability to apply theoretical ideas and frameworks in practice and in a critically reflective way. 
  • Reasoning and analysis: Ability to analyse, use critical reasoning and principles to formulate a position, balancing theory and personal reflection. 
  • Professional literacy and research: Understanding of professional factors (language and landscape) and ability to undertake appropriate research. 
  • Communication and presentation: Ability to communicate and present effectively (written and oral, as relevant).
  • Use of mathematical and statistical ideas: Ability to use mathematical and statistical ideas, methods and formulae appropriately. 
• Performance in relation to each of these criteria are assessed against the University’s grading descriptors:

Review of Grade and final examination Script viewing:

• A student who has been awarded a final grade for a unit and who does not believe it is an accurate reflection of their performance, and has grounds for such a claim and can demonstrate those grounds, may apply to have their grade reviewed. 
• For information on requesting a review of grade and/or viewing your final exam script, please refer to the University’s Grade Appeal Policy at http://www.mq.edu.au/policy/docs/gradeappeal/policy.html and MAFC Program Rules & Procedures at http://www.mafc.mq.edu.au.