Chapter 15

Shares of PLS United have been selling with rights attached. Tomorrow, the stock will sell independent of these rights. Which one of the following terms applies to tomorrow in relation to this stock?

Ex-rights date.

The difference between the underwriters' cost of buying shares in a firm commitment and the offering price of those securities to the public is called the:

Gross spread

Which one of the following statements concerning dilution is correct?

Market value dilution occurs when the net present value of a project is negative.

Direct business loans typically ranging from one to five years are called:

Term loans.

When a firm announces an upcoming seasoned stock offering, the market price of the firm's existing shares tends to:

decrease

Roy owns 200 shares of R.T.F., Inc. He has opted not to participate in the current rights offering by this firm. As a result, Roy will most likely be subject to:

Dilution

Mobile Units recently offered 30,000 new shares of stock for sale. The underwriters sold a total of 32,000 shares to the public at a price of $14.50 a share. The additional 2,000 shares were purchased in accordance with which one of the following?

Green shoe provision

The date on which a shareholder is officially listed as the recipient of stock rights is called the:

Holder-of-record date.

JLK is a partnership that was formed two years ago for the purpose of creating new fad items and distributing them directly to consumers. The firm has been extremely successful thus far and has decided to incorporate and offer shares of stock to the general public. What is this type of an equity offering called?

Initial public offering.

Alberto currently owns 2,500 shares of Southern Tools. He has just been notified that the firm is issuing additional shares and he is being given a chance to purchase some of these shares prior to the shares being offered to the general public. What is this type of an offer called?

Rights offer.

Pearson Electric recently registered 250,000 shares of stock under SEC Rule 415. The firm plans to sell 150,000 shares this year and the remaining 100,000 shares next year. What type of registration was this?

Shelf registration