Chapter 15
Regulation A
a SEC regulation that exempts public issues of less that $5 million from most registration requirements
Initial Public Offering
a company's first equity issue made available to the public. Also called an unseasoned new issue or an IPO
Green Shoe Provision
a contract provision giving the underwriter the option to purchase additional shares from the issuer at the offering price. Also called the overallotment option
Syndicate
a group of underwriters formed to share the risk and to help sell an issue
Prospectus
a legal document describing details of the issuing corporation and the proposed offering to the potential investors
Seasoned Equity Offering (SEO)
a new equity issue of securities by a company that has previously issued securities to the public
Red Herring
a preliminary prospectus distributed to prospective investors in a new issue of securities
Oversubscription Privilege
a privilege that allows shareholders to purchase unsubscribed shares in a rights offering at the subscription price
Rights Offer
a public issue of securities in which securities are first offered to existing shareholders. Also called a rights offering
Registration Statement
a statement filed with the SEC that discloses all material information concerning the corporation marking a public offering
Tombstone
an advertisement announcing a public offering
Standby Fee
an amount paid to an underwriter participating in a standby underwriting agreement
General Cash Offer
an issue of securities offered for sale to the general public on a cash basis
Gross Spread
compensation to the underwriter, determined by the difference between the underwriter's buying price and offering price
Term Loans
direct business loans of typically one to five years
Venture Capital
financing for new, often high-risk ventures
Underwriters
investment firms that act as intermediaries between a company selling securities and the investing public
Private Placements
loans (usually long-term) provided directly by a limited number of investors
Dilution
loss in existing shareholders' value in terms of ownership, market value, book value, or EPS
Shelf Registration
registration permitted by SEC Rule 415, which allows a company to register all issues it expects to sell within two years at one time, with subsequent sales at any time within those two years
Ex-rights Date
the beginning of the period when stock is sold without a recently declared right, normally two trading days before the holder-of-record date
Holder-of-Record Date
the date on which existing shareholders on company records are designated as the recipients of stock rights. Also, the date of record
Lockup Agreement
the part of the underwriting contract that specifies how long insiders must wait after an IPO before they can sell stock
Dutch Auction Underwriting
the type of underwriting in which the offer price is set based on competitive bidding by investors. Also known as a uniform price auction
Standby Underwriting
the type of underwriting in which the underwriter agrees to purchase the unsubscribed portion of the issue
Firm Commitment Underwriting
the type of underwriting in which the underwriter buys the entire issue, assuming full financial responsibility for any unsold shares
Best Effort Underwriting
the type of underwriting in which the underwriter sells as much of the issue as possible, but can return any unsold shares to the issuer without financial responsibility