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