Module 5-2

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

Blue Stone Builders recently offered to sell 45000 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

Mobile Unites recently offered 75000 new shares of stock for sale. The underwriters sold a total of 78500 shares to the public at a price of $16 a share. The additional 3500 shares were purchased in accordance with which one of the following?

Green shoe provision

Which one of these describes an exception to the registration filing requirement of the SEC

Issues of less than $5 million

All of the following are supporting arguments in favor of IPO underpricing except which one?

Provides better returns to issuing firms

Which one of the following is a preliminary prospectus?

Red herring

The Securities and Exchange Commission

Reviews registration statements to ensure they comply with current laws and regulations

Which one of the following is a key goal of the aftermarket period?

Supporting the market price for a new securities issue

What is a prospectus?

a document that describes the details of a proposed security offering along with relevant information about the issuer

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

Jones & Co. recently went public and received $23.07 a share on their entire offer of 30000 shares. Keeser & Co served as the underwriter and sold 28500 shares to the public at an offer price of $26.50 a share. What type of underwriting was this?

firm committment

What is an issue of securities that is offered for sale to the general public on a direct cash basis called?

general cash offer

A syndicate can best be defined as a

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

Existing shareholders

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

Before a seasoned stock offering, you owned 500 shares of a firm that had 20000 shares outstanding. After the seasoned offering, you still owned 500 shares but the number of shares outstanding rose to 25000. Which one of the following terms best describes this situation?

percentage ownership dilution

The 40-day period following an IPO during which the SEC places restrictions on the public communications of the issuer is known as the ________ period

quiet

Alberto currently owns 2500 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

Pearson Electric recently registered 180000 shares of stock under SEC Rule 415. The company plans to sell 100000 shares this year and the remaining 80000 shares next year. What type of registration was this?

shelf registration

Advertisements in a financial newspaper announcing a public offering of securities, along with a list of the investments 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 an

underwriter