What issues does the secondary market face when it comes to IPOs?
The Economic Times (TET) in India explains that when a company issues securities to the public for the initial time, it is offered in the primary market. However, once the IPO (initial public offering) has been offered, and the stock can be listed in the market, those securities are then traded in the secondary market (TET). The main difference between the two markets is that when an investor puts down money for securities in the primary market, that investor deals directly with the company offering the IPO. But once the securities are in the secondary market, the investor buys them from "other investors willing to sell…" (TET).
What can go wrong -- how can fraud occur in secondary markets?
In Forbes, contributor J.J. Colao offers an example of what can go wrong or awry with secondary markets. He notes that for many...
Those who launch startups had "reliable means of selling stakes" in the startup well before an IPO was issued, and hence, they could keep control of the startup "…and shield them from the searing gaze of public markets longer…"
But Tangent Capital's Bob Rice and August Capital's David Hornik have put forth "lengthy denunciations" of secondary markets because they insist that those involved in large private placements "…may get access to financial information under a non-disclosure agreement," and that is not fair to other investors (Colao, p. 3). Basically they are talking about a lack of transparency. There is speculation that before Goldman Sachs raised $2 billion for Facebook in 2011, it got "…a peek at the company's user metrics and financials" (Colao, p. 3). In fact Goldman Sachs "doubled the amount of stock it sold on the day of the IPO" which coincided with a "selective disclosure of the company's second quarter results" (Colao, p. 3). This kind of "mischief" can and does occur in secondary markets, Colao explains.
As to how fraud can occur in secondary markets, Vivek Wadhwa writes in the Washington Post that the secondary markets' "bubble…represents a danger to America's leadership position in the technology sector" (Wadhwa, 2011). That bubble also brings a serious threat to the "culture of innovation that made Silicon Valley great" because secondary…
Securities Regulation SECURITIES REGULARIZATIONS IN NON-PROFIT ORGANIZATIONS The ensuring of the fact that an organization is working as per regulations and is following the code of conduct, while keeping the interest of the public first, are matters which are becoming more and more complicated with the passage of time. Therefore, it can be said with some emphasis, that today one of the most basic issues of many organizations is the issue of
"Yet earnings estimates have acquired a life of their own and often generate more attention from the media and analysts than a company's actual financial results." (Whalen, 2003). More conservative critics of analyst conflicts rules believe that they are a step in the right direction, but view them as a work in progress. For example, the Sarbanes-Oxley bill, which mandated many improvements in corporate managers' financial practices, did nothing to
While this strategy is effective in some situations, the use of bond markets by an investor requires the development of an effective strategy that will help him/her to achieve a specific financial objective. For an investor seeking to maximize the profit-generating aspects of bonds, the most effective strategy is a passive buy-and-hold bond strategy. As the name suggests, it involves buying individual bonds and holding them until maturity. The
Some mergers and acquisitions (M&as) did not generate any goodwill because they were accounted for using the pooling-of-interests method. In 1969, Leonard M. Savoie (then Executive Vice President of the AICPA) stated that he expected the then-prevailing accounting pronouncement authority, the Accounting Principles Board (APB), to abolish the pooling of interests method. However, the death-knell for this accounting method was not sounded until 2001 with the issuance of SEAS
Sarbanes-Oxley. The political pressure of the past several years following the dot.com bubble and the collapse of several major companies created a need for new securities legislation, which culminated last year in the Sarbanes-Oxley Investor Protection Act, which establishes new guidelines for the securities industry. Initially a Democratic brainchild, the act became favored by Republicans in the House when it was realized that such adjustments would be of great benefit to
b) It is required that the "summary prospectus appear at the front of a fund's prospectus." (Security Exchange Commission (b)) c) Amendments have been made so that the Internet can be used to give important 'information' inclusive of "description of the fund's investment objectives and strategies, fees, risks, and performance." (Security Exchange Commission (b)) d) The Form N-1A, for mutual funds, should have the "key information at the front of its statutory