Raising Capital Problem Set

Dutch Auction

A method of issuing securities (common stock) by which investors place bids indicating how many shares they are willing to buy and at what price. The price the stock is then sold for becomes the lowest price at which the issuing company can sell all the available shares.

underwriter

A person who evaluates and classifies risks to accept or reject them on behalf of the insurer.

rights offer

An offer that gives a current shareholder the opportunity to maintain a proportionate interest in the company before shares are offered to the public.

venture capital

Money that is invested in new or emerging companies that are perceived as having great profit potential

What is a prospectus?

a document that describes the details of a proposed security offering along with relevant information about the issuer

Underwriters generally:

accept the risk of selling the new securities in exchange for the gross spread.

With Dutch auction underwriting:

all successful bidders pay the same price per share

when a CEO wants to make a company public what is the first step he/she must take?

gain board approval

a syndicate can be best defined as a

group of underwriters sharing the risk of selling a new issue of securities

Equity financing of new, non-public companies is referred as

private equity

What is the form called that is filed with the SEC and disclose4s the material information on a securities issuer when that issuer offers new securities to the general public?

registration statement

Seasoned Equity Offering (SEO)

sales of newly issued equity shares by publicly owned company

which one of the following is a key goal of the aftermarket period?

supporting the market price for a new securities issue

Initial Public Offering (IPO)

the first time a company issues stock that may be bought by the general public

firm commitment underwriting

the type of underwriting in which the underwriter buys the entire issue, assuming full financial responsibility for any unsold shares

when selecting a venture capitalist, which one of the following characteristics is probably the least important?

underwriting experience

Business Aid is funded by a group of wealthy investors for the sole purpose of providing funding for individuals and small firms that are trying to convert their new ideas into viable products. What is this type of funding called?

venture capital