FIN 300 Ch 15

Trevor is the CEO of Harvest Foods, which is a privately held corporation. What is the first step he must take if he wishes to take Harvest Foods public?

Gain board approval

Mobile Units recently offered 75,000 new shares of stock for sale. The underwriters sold a total of 78,500 shares to the public at a price of $16 a share. The additional 3,500 shares were purchased in accordance with which one of the following?

Green Shoe provision

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

The raising of small amounts of capital from a large number of people is known as:

crowdfunding

hen 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 RTF Inc. He has opted not to participate in the current rights offering by this company. As a result, Roy will most likely be subject to:

dilution

Which one of the following statements is correct concerning the issuance of long-term debt?

Direct placement debt tends to have more restrictive covenants than publicly issued debt.

Which one of the following statements concerning venture capitalists is correct?

Exit strategy is a key consideration when selecting a venture capitalist.

It is common for venture capitalists to receive at least ___ percent of a start-up company's equity in exchange for the venture capital.

40%

Which one of the following is a preliminary prospectus?

Red herring

With firm commitment underwriting, the issuing firm:

knows upfront the amount of money it will receive from the stock offering.

Existing shareholders:

may or may not have a pre-emptive right to newly issued shares

Advertisements in a financial newspaper announcing a public offering of securities, along with a list of the investment banks handling the offering, are called:

tombstones

Executive Tours has decided to go public and has hired an investment firm to handle the offering. The investment firm is serving as a(n):

underwriter

Pearson Electric recently registered 180,000 shares of stock under SEC Rule 415. The company plans to sell 100,000 shares this year and the remaining 80,000 shares next year. What type of registration was this?

shelf registration

Shelf registration allows a firm to register multiple issues at one time with the SEC and then sell those registered shares anytime during the subsequent:

2 years

Jones & Co. recently went public and received $23.07 a share on their entire offer of 30,000 shares. Keeser & Co. served as the underwriter and sold 28,500 shares to the public at an offer price of $26.50 a share. What type of underwriting was this?

Firm commitment

Alberto currently owns 2,500 shares of Southern Tools. He has just been notified that the company 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

Blue Stone Builders recently offered to sell 45,000 newly issued shares of stock to the public. The underwriters charged a fee of 8.2 percent and paid Blue Stone Builders the uniform auction price for each of those shares. Which one of the following terms best describes this underwriting?

dutch auction

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

A syndicate can best be defined as a:

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

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

private equity

The Securities and Exchange Commission:

reviews registration statements to ensure they comply with current laws and regulations.

What is a seasoned equity offering?

sale of newly issued equity shares by a firm that is currently publicly owned

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

term loans

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

JLK is a partnership that was formed two years ago and has been extremely successful thus far. The owners have decided to incorporate and offer shares of stock to the general public. What is this type of an equity offering called?

Initial public offering

Which one of the following statements concerning venture capital financing is correct?

Venture capitalists should have key contacts and financial strength