Fiance 300 Final
Direct private long-term financing typically has (less/more) restrictive covenants than public issues of debt.
More
Access to venture capital is very limited and it is estimated that only company is funded for every 100 proposals received.
One
A __________ equity offering is a new equity issue of securities by a firm that has previously issued securities to the public.
Seasoned
Which act sets forth the federal regulation for all new interstate securities issues?
The Securities Act of 1933
True or false: The most difficult part of the underwriting process for an initial public offering is determining the correct offer price.
True
Which of the following are explanations of underpricing?
Underpricing is a kind of insurance for the investment banks. Underpricing occurs with smaller issues in order to attract investors.
Financing from wealthy individuals or private investment groups is referred to as ______ capital.
Venture
Investment firms that act as intermediaries between the company selling securities and the public are called
underwriters
Which of the following are true about the venture capital (VC) market?
Access to venture capital is very limited. Personal contacts are important in gaining access to the VC market.
An agreement in an underwriting contract that prohibits insider shares from being sold immediately following an IPO is called a _______ period.
Lockup
In the world of start-up ventures, OPM stands for ____.
Other People's Money
Most debt is _____
Privately issued
The large payoff for a venture capital firm typically comes when the company is either sold to another company or goes
Public
Which of the following are important considerations when choosing between venture capitalists?
Style Exit strategy Financial strength
Which act regulates securities already outstanding?
The Securities Act of 1934
Which of the following are costs of issuing new securities?
The gross spread The Green Shoe option Underpricing
The ________ curse describes how average investors in an IPO receive their full allocation of new shares because those in the know avoided the issue.
Winner's
A company must file a registration statement with the SEC unless the _____.
issue is less than $5 million and loans that mature within 9 months
The lockup period in an underwriting contract _____.
prohibits insider shares from being sold immediately following an IPO
Which is true regarding the difference between competitive and negotiated underwriting?
Competitive underwriting is typically cheaper than negotiated underwriting.
The practice of raising small amounts of capital from a large number of people is called _____.
Crowdfunding
With the ______ method of issuing securities, the offering price is determined by submitted bids.
Dutch auction
With the ______ method of issuing securities, the underwriter determines the offer price based on submitted bids.
Dutch auction underwriting
True or false: During the aftermarket period, is it typical for members of the underwriting syndicate to sell securities for less than the offering price.
False
Many startup companies are now choosing to raise funds through a(n) _____ rather than the traditional venture capital methods.
ICO
Crowdfunding typically uses which of the following to raise small amounts of capital from a large number of people?
Internet
Since most banks will not loan to startup companies with no assets, most startup ventures need _____.`
OPM
True or false: Interest rates are higher in the private placement market than in the public debt market.
True
Which new issue cost results from a stock initially being sold for less than its true value?
Underpricing
______ helps new shareholders earn a higher return on the shares they buy.
Underpricing
One reason for underpricing is that it serves as _____ for investment banks.
a type of insurance
The period after a new issue is initially sold to the public is called the
aftermarket
The initial sale of a token on a digital currency platform is called _____.
an initial coin offering
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
Firm commitment underwriting is the type of underwriting in which the underwriter _________ the entire issue.
buys
With the ______ method of selecting a syndicate, the issuing firm offers its securities to the highest bidding underwriter.
competitive offer
Dilution refers to a loss in _________ shareholders' value.
existing
An investment bank that underwrites a security issue by buying the securities for less than the offering price and accepting the risk that the securities won't sell is using the ______ method.
firm commitment
A venture capitalist will most likely experience a big payoff with a successful startup company when the start-up _____.
goes public
The first public equity issue made by a firm is called a(n) ___.
initial public offering
How a firm raises capital depends on the size of the firm, its growth prospects, and its _____.
life-cycle stage
Dilution is defined as a(n) ____.
loss in existing shareholders' value
Potential reasons for stock price declines after the announcement of new equity issues include debt usage, issue costs, and _____.
managerial information
In order to issue a security to the public, management's first step is to ___.
obtain board approval
Debt that is issued privately accounts for _____ of all debt.
over half
The market for venture capital refers to the _____.
private financial marketplace for new or distressed firms
A new equity issue by a publicly traded firm is known as a(n) ___.
seasoned equity offering
Private equity firms provide financing for firms that otherwise would have difficulty raising capital such as _____ firms.
startup distressed closely held private
Possible explanations of the drop in a stock's price after an announcement of a new equity issue are that the announcement is an indication that ___.
the firm has too much debt management believes the firm is overvalued
Whether a firm obtains capital by debt or equity financing depends on _____.
the firm's life-cycle stage the size of the firm the firm's growth prospects
The difference between the price the issuer receives and the offering price is ___.
the gross spread
When average investors in an IPO receive their full allocation of new shares because the smart money avoided the issue, they fall victim to ____.
the winner's curse
If a cash offer is a public offer, a(n) ________ is usually involved.
underwriter
An initial public offering (IPO) is also referred to as a(n) ___.
unseasoned new issue