MGF chapter 15
a new equity issue by a publicly traded firm is known as a
seasoned equity offering
the fee the underwriter receives for managing a securities issue is typically termed the _____
spread
private equity firms provide financing for firms that otherwise would have difficulty raising capital such as: (3)
start up firms distressed firms closely held private firms
possible explanations for the drop in a stocks price after an announcement of anew equity issue are the announcement is an indication that ________ (2)
the firm has too much debt management believes the firm is overvalued
what are costs of issuing new securities (3)
the green shoe option the spread underpricing
the difference between the price the issuer receives and the offering price is
the gross spread
the market venture capital refers to
the private financial marketplace for new high risk firms
a firms registration statement to issue securities will typically include all of the following except
the proposed price for security
which act sets forth the federal regulation for all new interstate securities issues
the securities act of 1933
whether a firm obtains capital by debt or equity financing depends on (3)
the size of the firm the firms growth prospects the firms life cycle stage
when average investors in an IPO recipe their full allocation of new shares because the smart money avoided the issue, they fall victim to
the winners curse
an advertisement published in financial newspapers such as wall street journal used during and after registration waiting period is called a
tombstone
______ helps new shareholders earn a higher return on the shares they buy
underpricing
in 1999-2000 time period, companies missed out on the 63 billion because of ______
underpricing
which new issue cost results from the stock being sold for less than its true value
underpricing
when a firm ultimately prices its IPO above its target "file price range", the usual result is that
underpricing is much more severe
what are explanations of underpricing? (3)
underpricing occurs with smaller issues in order to attract investors underpricing is a kind of insurance for underwriters underpricing occurs to reward institutional investors who helped underwriters price the issue
if a cash offer is public offer, a _______ is usually involved
underwriter
a dutch auction underwriting is also known as
uniform price auction
an initial public offering (IPO) is also referred to as
unseasoned new issue
entrepreneurs seeking start up capital must really rely on
venture capital
underwritiers of an IPO usually do which of the following for the issuing client (3)
1) assist with the SEC registration process 2) price the securities 3) sell the securities
in order what are the steps in issuing securities to the public in order
1) obtain approval from the firms board of directors 2) prepare and file a registration statement 3) pre pare and distribute preliminary prospectus copies 4)determine a selling price 5) prepare and distribute a final prospectus
what is true about the venture capital (VC) market? (2)
1) personal contacts are important in gaining access to the Vc market 2) access to venture capital is very limited
the available evidence indicates that there are pronounced cycles in which of the following select all that apply? (2)
1) the degree of IPO underpricing 2) the number of IPOs
financing by wealthy individuals or private investment groups is referred to as (2)
1) venture capita 2) private equity
a risk to the issuing firm of a "best efforts" underwriting agreement is _________(2)
1)all the shares won't be sold 2)the issuing firm will not raise the needed capital
floatation costs for issuing securities include which of the following (4)
1)underpricing 2)legal fees and taxes 3)management time 4)underwriters spread
private equity financing after ground floor financing is termed ______ financing
Mezzanine
the issuing firm is more certain of raising the needed capital with
a firm commitment offering
in return for early stage financing, venture capitalists will frequently receive which of the following (3)
ability to name some management seats on board convertible preferred stock
the period after a new issue is initially sold to the public is referred to as the
aftermarket
a green shoe option is used to
allow underwriters to sell extra shares to investors without fear of loss
private placements of debt have the following advantages (3)
avoids SEC registration easier to renegotiate in case of financial distress of the issuer distribution costs are lower
investors tend to view a seasoned equity offering as_____ news, thus the stock price ____ on the announcement before the actual issue
bad; declines
in the _____ method of issuing securities, the underwriting syndicate avoids the risk of unsold securities
best efforts
under the ________ method, the underwriter sells as many shares as possible but may or may not sell all of the new shares
best efforts
with the ________ method of selecting a syndicate, the issuing firm offers its securities to the highest bidding underwriter
competitive offer
in addition to shelf registration, firms can also issue new equity securities using the ___________ method
dribble
with the ________ method of issuing securities, the underwriter determines the offer price based on submitted bids
dutch auction underwriting
an investment bank that underwrites a security issue by buying the securities for less than offering price and accepting the risk that the securities won't sell is using the ______ method
firm commitment
under the __________ method, the underwriter purchases all the shares to be offered
firm commitment
the costs associated with new issues are known as
flotation costs
a firm can use a self registration if _______- (3)
it is rated investment grade it hasn't defaulted on debt in the past 3 years the firms aggregate market value is more than 150 million
an agreement in an underwriting contract that prohibits insider shares from being sold after an IPO is called a ________
lockup
the predominant method of selecting an underwriter in the US is
negotiated offer
a red herring is another name for
preliminary prospectus
the SEC's logic for requiring the "quiet period" is that all relevant information should already be publicly available in the _______
prospectus
the period of time before and after an IPO when communication with the public is limited is known as the _____ period
quiet
a document required by the SEC for new public issues that contains the issuing firms financial information, financial history, and details of existing business is known as the
registration statement