FIn 302 connect

In the ______ method of issuing securities, the underwriting syndicate avoids the risk of unsold securities.

Best efforts

True or false: The most difficult part of the underwriting process for an initial public offering is determining the correct offer price.

False

Which of the following are important considerations when choosing between venture capitalists?

Financial strength Exit strategy Style

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

The period of time before and after an IPO when communication with the public is limited is known as the ______ period.

Quiet

Cash offers are offered to the general public and_______ offers are offered first to existing shareholders.

Right

Traditional negotiated cash offers include all but which of the following?

Shelf cash offers

The quiet period ends______ calendar days after an IPO.

40

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.

Which is true regarding the difference between competitive and negotiated underwriting?

Competitive underwriting is typically cheaper than negotiated underwriting.

With the ______ method of issuing securities, the underwriter determines the offer price based on submitted bids.

Dutch auction underwriting

A contract provision giving the underwriter the option to purchase additional shares from the issuer at the offering price is called a _____ provision.

Green Shoe

When is a new issue usually priced?

On the effective date of the registration statement

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

Which act regulates securities already outstanding?

The Securities Act of 1934

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

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

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.

An agreement in an underwriting contract that prohibits insider shares from being sold immediately following an IPO is called a _______ period.

lockup

A Dutch auction underwriting is also known as a(n) ___.

uniform price auction

One reason for underpricing is that it serves as _____ for investment banks.

a type of insurance

The initial sale of a token on a digital currency platform is called _

an initial coin offering

A firm uses a tombstone advertisement to ___.

announce a new security issue

Under the ______ method, the underwriter sells as many shares as possible but may or may not sell all of the new shares.

best efforts

The difference between general cash offers and rights offers is that ___.

cash offers are offered to the general public and rights offers are offered first to existing shareholders

Examples of nontraditional cash offers include ___.

competitive firm cash offers and shelf cash offers

With the ______ method of selecting a syndicate, the issuing firm offers its securities to the highest bidding underwriter.

competitive offer

A Green Shoe provision is used to ___.

cover excess demand and oversubscriptions

The practice of raising small amounts of capital from a large number of people is called _____.

crowdfunding

In a(n) ______listing, a firm arranges for its stock to be listed on an exchange without marketing and other help from an underwriter.

direct

Potential reasons for stock price declines after the announcement of new equity issues include debt usage, issue costs, and _____.

dribble

On the_______ date of the registration statement, a price is determined and selling efforts can fully begin.

effective

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

The costs associated with new issues are known as ___.

flotation costs

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

A company must file a registration statement with the SEC unless the _____.

issue is less than $5 million

A firm can use a shelf registration if ___.

its aggregate market value is more than $150 million it is rated investment grade it has not defaulted on debt in the past 3 years

How a firm raises capital depends on the size of the firm, its growth prospects, and its _____.

life-cycle stage

Potential reasons for stock price declines after the announcement of new equity issues include debt usage, issue costs, and _____.

managerial information

The flotation costs are the costs associated with ___issues

new

In order to issue a security to the public, management's first step is to ___.

obtain board approval

Access to venture capital is very limited and it is estimated that _______ only company is funded for every 100 proposals received.

one

Debt that is issued privately accounts for _____ of all debt.

over half

A red herring is another name for a ___.

preliminary prospectus

The market for venture capital refers to the _____.

private financial marketplace for new or distressed firms

Most debt is ___.

privately issued

The lockup period in an underwriting contract _____.

prohibits insider shares from being sold immediately following an IPO

The large payoff for a venture capital firm typically comes when the company is either sold to another company or goes

public

Firm commitment underwriting is the type of underwriting in which the underwriter the entire issue.

purchases

The preliminary prospectus, which contains much of the information found in the registration statement and is distributed to potential investors, is called a ___.

red herring

The SEC requires a ____statement which is a document that discloses all material information concerning the corporate making a public offering.

registration

A document required by the SEC for new public issues that contains the issuing firm's financial information, financial history, and details of the existing business is known as the ___.

registration statement

A new equity issue by a publicly traded firm is known as a(n) ___.

seasoned equity offering

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 growth prospects the firm's life-cycle stage the size of the firm

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

An advertisement used after the registration waiting period to announce a new securities issue is called a ___.

tombstone

If a cash offer is a public offer, a(n) ________ is usually involved.

underwriter

Investment firms that act as intermediaries between the company selling securities and the public are called

underwriter

An initial public offering (IPO) is also referred to as a(n) ___.

unseasoned new issue

Financing from wealthy individuals or private investment groups is referred to as ______ capital.

venture

In a direct listing, a firm arranges for its stock to be listed on an exchange ______.

without marketing and other help from an underwriter