1. ©2012 McGraw-Hill Ryerson Limited 1 of 20 Learning Objectives 4.Analyze the dealer’s role in pricing corporate securities. Evaluate the influence of issued securities on earnings per share and market share price. (LO4) 5.Appraise the pros and cons of going public versus going private when raising funds. (LO5) 6.Describe a leverage buyout. (LO6)

2. ©2012 McGraw-Hill Ryerson Limited 2 of 20 Services Provided by Investment Dealer Pricing the security –Apply appropriate valuation techniques (Chapter 10) –Consider anticipated public demand for the new issue –Evaluate general market condition Dilution of earnings per share –Before the issue –After initial issue: e.p.s. ↓ from increased shares –After issue: e.p.s. ↑ as earnings increase from invested capital Market stabilization –providing support to new securities by repurchasing them if the market price falls LO4

3. ©2012 McGraw-Hill Ryerson Limited 3 of 20 The Securities Industry and Underwriting Activity in Canada Dramatic changes in this industry have occurred due to  the deregulation of the industry in the 1980s  the internationalization of the capital markets and from technological advances Besides the underwriting function, the investment firms have expanded:  corporate finance, merger/acquisition advisory service, derivatives, and bond trading activities. LO4

4. ©2012 McGraw-Hill Ryerson Limited 4 of 20 Figure 15-3 New corporate issues underwritten in 2010, in Canada LO4 Source: Investment Industry Association of Canada, “Annual New Issues, 2010.”