Question

You are a senior equities trading manager and you are brought “over the wall” to discuss a potential $800 million block trade with your colleagues in the Equity Capital Markets division. This is a transaction where a private equity shareholder will sell out of some of their position at a fixed price to your bank shortly after market close, at a discount to the daily closing price, and the bank has all of the downside risk and upside exposure between the price at which they purchase the block and the price at which they exit it. The stock in question is one that your company provides research on, but not one that you personally are very familiar with. What questions should you ask to each of Equity Capital Markets, your research analyst and sales heads (assuming they’re wall-crossed)?

Answer 1

The questions that should be asked to Equity capital Markets are:

a) How good is the company's business operations?

b) Whether the business is actually going to use the money invested in it for a useful purpose?

Questions for the research analyst:

a) Has the business been using its funds effectively?

b) Does it have a good reputation in the market?

c) What is the credit rating of the company and their credit solvency?

Questions for sales heads:

a) What are the sales figures of the company over the last few years?

b) What is the expected sales of the company in the coming few years?