Question 1(Akira) Because many nations who were once fully communist have adopted capitalist ideas and more countries are participating in free trade, international capital markets have grown increasingly common

Subject:BusinessPrice: Bought3

Share With

Question 1(Akira)

Because many nations who were once fully communist have adopted capitalist ideas and more countries are participating in free trade, international capital markets have grown increasingly common. Increases in free trade are mostly attributable to improved communication and recognition of mutually advantageous industrial agreements. This surge in international trade has also resulted in an increase in international investment. International investors are attracted to the US market, and the country has placed regulations and authorities in place to protect people who invest in government securities, federally sponsored credit agency securities, municipal securities, corporate bonds, preferred stock, and common stock. As technology and capitalism have advanced around the world, security markets have changed. The economy is no longer a collection of isolated countries, but rather a fluid global economy with investors looking for the best return with the least risk. As the trend of countries removing government controls over businesses has slowed, the United States has become a paradigm for what capitalism and success can look like for other countries. Federally Sponsored Credit Agencies, or FSCAs, are some of the largest security markets in the world. These are generally agencies that support the housing industry, such as Freddie Mac and Fannie Mae, but they also include education loans and agricultural loans. Our text also addresses how substantial advancements in telecommunications are enabling a more connected globe to conduct business with one another.

 

The Electronic Communications Network, or ECN, has made it possible to trade using computer networks while also allowing for the monitoring of current stock values in order to sell or trade. Because of the ability to employ electronic trading, the market and the way stocks are regulated, traded, and purchased have changed. The Chicago Mercantile Exchange, usually known as CME, is one of the companies that make up a conglomerate. This conglomerate is made up of a number of significant firms that sell their stocks at regional levels, allowing traders to choose whether to trade with the CME or the NYSE, giving them dual trading choices.

 

UScellular

In order to allocate funding for the continuous expansion of 5G rollout in 2020, UScellular had to make various decisions. This is a necessary business expenditure as well as a significant outlay in order to stay competitive with the other wireless behemoths. The tough part of this current resource allocation process is that due to the ongoing build out and deployment time frame, no estimated returns on investment are predicted for several years. UScellular was able to raise financing through issuing long-term debt that would be paid off in 2033, as well as using cash and cash equivalents to fund future 5G developments.

Question 2(Dawn)

The following discussion forum will discuss the evolution of securities markets like NASDAQ, CME, ECNs, and foreign exchanges. Security Markets comprise myriad securities, from government bonds to corporate common stock, influenced by many variables such as interest rates, exchange rates, investors’ confidence, economic growth, global crises, and more (Block, Hirt & Danielsen, 2019). They help corporations, government agencies as well as individuals with capital allocations. Securities markets allow stocks, bonds, and other securities to be bought and sold quickly and at a fair price. 

Most people are familiar with the more common security markets like The New York Stock Exchange (NYSE) and The National Association of Securities Dealers Automated Quotations (NASDAQ). The NYSE is an auction market that uses specialists, while the NASDAQ is a dealer market with many market makers competing. Today, the NYSE is part of the Intercontinental Exchange (ICE), and the NASDAQ is part of the publicly traded NASDAQ, Inc. The NASDAQ exchanges are completed electronically on an international level, while brokers actively trade stocks on the floor of the NYSE. The Chicago Mercantile Exchange (CME)is a futures exchange that trades in interest rates, currencies, indices, metals, and agricultural products. CME has been increasing in popularity since it started back in 2007 since they are a means of protecting investing companies (Block, Hirt & Danielsen, 2019).

Electronic communication networks (ECNs) are used today to trade. ECNs are computerized system that automatically matches buy and sell orders for securities in the market. It has made it easier to trade with computers. Individuals can view the current selling prices and anticipated purchasing prices of stocks and be matched at the best price available. It is a highly efficient process using sophisticated technology. 

The efficient market hypothesis suggests markets adjust very quickly to new information and that it is challenging for investors to select securities portfolios that outperform the market. The efficient market hypothesis may be stated in many different forms, as indicated in Chapter 14 of our textbook. If stock markets are efficient, it is challenging for investors to select portfolios of common stocks that can outperform the stock market in general. The efficient market hypothesis is stated in three forms—the weak, semi strong, and strong (Block, Hirt & Danielsen, 2019). I do not think that it is either a good or bad thing; I believe it helps calm investors when markets turn sour – as they always do from time to time

Dark pools work much like ECNs, except that the size of the orders and the prices are not available to the other traders in the pool or to the public (Block, Hirt & Danielsen, 2019). The lack of transparency in dark pools could result in poor execution of trades or abuse but gives potentially better prices and lower costs in exchange fees. 

A real-life company that raised capital in 2020 is Vroom. I work at a car auction, and this company is one of my accounts, so I went with them. Their IPO date was June 8, 2020, at $22.00 per share (Vroom, Inc., 2021). They continued expansion to allocate capital for the company by taking the used car market to another level. They bring buyers and sellers together and have over 3000 cars a day online. They integrated a state-of-the-art website with the funding, and it provides the necessary resources to grow further and scale their business. Their stock is low; it closed today at $13.57, but their revenue is up 177.63%, according to their financials. They have raised a total of $721 million since it was launched by investors that include General Catalyst, Altimeter Capital, and Allen & Co (Vroom, Inc., 2021).

 

Question 3 (Jackie)

Warner Music Group decided to go public and offer stock on June 3rd, 2020. This was part of a secondary sale as 77,000,000 units of common stock would be sold by Access Industries LLC (Wills, 2020). The initial public offering price was $25 and at 77 million was figured to be worth 1.93 Billion dollars for the company. Warner Music Group or WMG closed at $30.12 on its first day, within its first $10 days it stayed relatively close to its day 1 closing price at $30.77, and similarly by day 30 closing at $29.35. The underwriters for the IPO were Morgan Stanley, Credit Suisse and Goldman Sachs as the lead underwriters, along with several others as joint bookrunners (Linnane, 2020). The bookrunners consisted of 23 banks including Bank of America Securities, Citigroup, and J.P. Morgan.

According to the website Statist, the underwriters would have collected a 5.4 % fee on top of gross proceeds from the offering. When I took the 1.925 billion that was gained and then figured the fees, this would have been $103,950,000. That’s 100 Million dollars in fees for this IPO (Rudden, 201). Additionally, there is an SEC filing fee that is $92.70 per $1,000,000. The math on this worked out to be an additional $21,035,598 in fees for SEC filings. This totals to $124,985,598 in fees for the IPO of Warner Music Group. Since the IPO WMG has average around $42 a share seeing an increase form its IPO and 30-day average of around $30. This shows that there was significant return gained based off volume for the underwriters, investors, as well as WMG gaining around 1.8 billion from its IPO in capital.

A Dutch Auction approach takes the initial offering and determines the prices after all bids and determining the highest price. With this the price would then continue to be lowered until it gets a bid. With a traditional underwriting method, there are investment firms and banks that would purchase the public offerings and assume the risks but guarantees the company has made its money. With the traditional underwriting process there is also the ability for the underwriters to increase the price and make a market as needed to help the sale of the stock (Block, 2019).

 

Question 4 (Timothy)

One of the main differences between a Dutch auction and the traditional underwriting method would be that in a Dutch Auction they use bids on the stocks to determine what the price should be set at. Whatever the highest bid is ends up dictating the final buying price for all buyers. What this does open up is for smaller investors to get involved because they have the ability to set the price on stocks. This allows for there to be no bidding wars also because during a Dutch auction it is all blind bidding. This gives the investor the full power to set the price of a stock at what they truly believe it to be unlike crazy fluctuation in prices because of rumors or certain things that are going on like what we saw with Gamestop this year. 

The company I decided to look into was DoorDash. They IPO'd on December 9th of 2020. The initial public offering for Doordash was $102 a share. At the end of the first day the share closed at $189.51. After 10 days of trading the stock was at $156.79. After 30 days of trading it was at $152.77. At launch the market value of DoorDash was about $69 billion and they offered 33 million shares. So far they are down 16% returns since IPO.