Chap 15 Flashcards
Venture Capital
Financing of a new often high risk venture. They often provide financing in stage to limit their risk. Each Stage represents a key step in the growing process of the company
5 Considerations in choosing a ventur capital
- Financial strenght
- Style
- References
- Contact with customer or supplier
- Exit strategy
Public issue
Creation and sell of securities which are to be traded on public market
Red Herring
Preliminary prospectus distributed to perspective investors in a new issue of securities. Containes financial informations but not the price
Prospectus
Legal document containing details of the issuing corporation and the proposed offering to potential investors
Underwriter
investment dealer involved in the selling of an issue
Tombstone
Advertisment placed before and after the waiting period of a new issuing. It containes informations about the issue and the list of underwriters involved
Second Issue
A new issue of security by a firm that has already issued securities in the past
Initial Publis Offering (IPO)
A company’s first equity issue made available to the public. Also Unseasoned new issue
2 Types of public issues
- General Cash Offer
* Rights Offer
General Cash Offer
an issue of securities offeredfor sell to the general public on a cash basis
Rights Offer
A public issue of securities in which securities are first offered to existing shareholders
Seasoned Equity
A new equity issue of securities by a company that has already issued securities to the public
Syndicate
A group of underwriter formed to reduce the risk and help sell an issue
Spread
The compensation to the underwriter determined by the difference between the underwriter’s buying price and the offering price
Bought deal
WHen one underwriter buys issues directly from the issuing firm and sells them directly to investors
Regular underwriting
Purchase of securities by an investment banker for resale to the public
Firm commitment underwriting
The underwriter buys the entier issue, assuming full financial responsability for any unsoled shares
Best Effort Underwriting
Underwriter sells as much of the issue as possible but returns any unsold shared to the issuer without any financial responsibility
Dutch Auction Underwriting
A type of underwriting in which the offer price is based on a competitive bidding by investors. Also known as uniform price auction
Overallotment Option
Giver the members of an underwriting group the option to purchase additional shares at original offering price to cover excess demand and over subscription option
Lockup agreement
Part of the underwriting contract that specifies how long insiders mush wait after an IPO before they can sell stock
Quiet Period
Both Ontario Security Commission (OSC) and Security exchange comission (SEC) requier that managers and underwriters limit their comunication to the public in the 40 days following an IPO
Rights
If prehemptive rights is contained in the firm articles of incormoration, the firm must firts offer new issue of common stock to existing shareholders
