Business Finance - Aston Resources Limited and Dampier Gold Limited - Assignment Example

Business Finance: - Prospectuses to list on the ASX Name: Professor: Institution: Course: Date: Give a description of the activities of each of the businesses. Aston Resources Limited is a self-sufficient coal company that is based in Brisbane, Australia, and it is involved in another project of coming up with a new plant, Maules Creek coal project. Aston Resources Limited is in high gear of making sure that the .coal produced at the new established ground, Maules Creek, is brought into the existing market for exporting purposes. This does not stop it from selling some of the produced coal to some of the companies based in Australia that are normally in search of coal that is of high quality and is supposed to be used for blending reasons. Dampier Gold Limited is a company that is investing a lot in the activities of exploring the available gold bearing greenstone belt that is located in central part of the Western Australia. Therefore, the company is in the business of mining and processing gold in Australia. Identify the business structure of each firm at the time the prospectus was issued. Provide some explanations as to why the original owners of the business consider that a public company is now a more appropriate structure. Aston Resources Limited and Dampier Gold Limited started on a basic ground where a individuals decided to start a business that mainly focused on playing a role of a third party in dealing with the kind of products both are being involved in now. They have become one of the flagships within the Australian manufacturing sector, and this happened from the mid-20th century, and it has completely entered the 21st century as one of the leading retail reseller of different automotive products (Thakor and Boot, 2008). Now, the company is operating on a network that consists of more than 430 branches all through Australia and also in New Zealand, and most of its operations have been changed from a singular format that used to target trade market alone, to a dual format form of a business network, which is mainly targeting trade and retail markets. The main reason as to why the owners have seen the importance of adapting the public company is because of the aspect of making the company known to the whole public at large. Are the two issues underwritten? Using the specific characteristics of each IPO firm, explain why the issuers were likely to make this choice. The two issues within the companies are not underwritten as they had been put in much consideration since the prospectus was incorporated. Aston Resources Limited and Dampier Gold Limited are both mainly focused on the dual format of doing business, as they deal with the trade market and also retailer markets. In this case, it has been found to be quite capitalizing as both companies are able to raise more capital that is supposed to fund the selected research and development projects and the existing debts. The issuer of both companies had also found it quite working for the companies’ product lines to be enhanced, and this was to be through the awareness that they may get by the public towards their products. This was believed to be quite effective as the supposed Initial Public Offer was to involve the public thus exposing the companies’ products and other services close to existing new groups who were new potential customers. Identify any signaling mechanisms the issuers have used in the prospectus. Explain why issuers might use these signals. What other signals could the issuers have provided. The issuers have used the initial public offering as the main signaling mechanism, and this has been applied on most of the Australian firms. This mechanism has been used because of a number of benefits that comes with it. The initial public offering, or just known as the IPO, is the transaction of the first sale on a given a mount of stock by a company, and it is one of the best options that small companies can use for the purpose of better growth through the generation of the needed capital for expansion. The subsequent use of this signal has been the reason behind the increased market share for Aston Resources Limited and Dampier Gold Limited. The same Initial Public Offer was a proposed funding technique that was selected to cater for individuals who in one way or another are exiting the companies; therefore, was to be used as an exit strategy for funding individuals. Aston Resources Limited has been believed of using the IPO for the purpose of cashing in on its successful outlets of which have started growing well. Currently, the companies are using the one of the two features of IPO, namely the increased popularity of the book-building method. This method IPO mechanism facilitates the agreement between the existing intermediary and the investors within the company chain of doing business. On the other hand, it can also intensify the existing conflicts of interests between intermediaries and issuers. Therefore, this has been a significant concern for Aston Resources Limited and Dampier Gold Limited where it has been known that the method is believed to cause more damage to the market. After an intensified research about the book-building method, it has clearly been found out that most of the mechanisms that normally aggravate the conflict of interests between the issuer and the intermediary are not necessarily made to hinder the normal functioning of the market, but on the other hand, it facilitates the market by promoting the trade. There are other signaling mechanisms that the issuer can use, and it all depends on the main goals that the issuer what to achieve at the end of process, the company overall structure, and the experts involved in the process. A unit initial public offer is a mechanism where firms using it are characteristically riskier. They normally use less prominent underwriters and have a lesser level of ownership restriction as compared to other firms that apply IPO mechanism. There is another mechanism that can be explored and that is the agency–cost explanation that was first presented by Schultz (Free, 2010). Do your issuers meet the definition of small business prior to listing? Explicitly state your chosen definition of small business. The two issuers, which in this case are Aston Resources Limited and Dampier Gold Limited, do meet the definition of a small business prior to listing. The overall transition, in which the two companies have gone through since they were first founded, and how they have developed into multi-million companies are justifications of this claim. A small business is any business that has not more than 200 employees and could take a form of sole proprietorships and partnerships that have no employees. Such businesses have a tendency of having the following management or organizational uniqueness: They have independency on ownership and the overall operations of the business. The owners or the company’s managers have a close control to the overall dealings within and without the company. The same individuals also add value to the company and most or even all of the business operating capital. The owners or managers are the main principals when it comes to decision-making within the company. Most of manufacturing and mining industries are within this category when they have not more than 500 of employees, but a few industries allow up to 750, 1000 or even 1,500 employees. For all wholesale trade industries, it is considered to have 100 or fewer employees. When considering small business in the form of sales receipts, industries normally goes for $6 million per year in sales (with slight exceptions of some). General & heavy construction industries for $27.5 million per year; all exceptional trade contractors have $11.5 million per year in sales; and most of agricultural, forestry and fishing industries going for $0.46 million within a year in the overall sales (Free, 2010).   Read More