The public offering Flashcards
what is a closely held company?
a company in which there are a small number of stock holders; no access to public securities market
what is a public company?
a company in which shares of the company are owned by a large number of investors; shares are traded in the public securities market
what is the purpose of a company going public?
raise a substantial sum of money
what is the goal of an RS?
disclosure
what is a dutch auction?
a type of IPO where bidding open for a period of time to investors, market sets price based on incoming bids, person who bids the highest is first in line to buy securities but the lowest price will determine the sale price of the security
what does sec. 5(a) say about selling securities?
can’t sell any securities until RS becomes effective
what does sec. 5(b) say about selling securities?
can’t sell any securities w/o an accompanying prospectus
what does sec. 5(c) say about selling securities?
can’t offer to buy/sell securities unless an RS has been filed (can’t offer to buy/sell during pre-filing or waiting period)
who is an underwriter under the traditional definition?
traditionally large investment banks that serve as intermediaries b/t issuer and investors (underwriter buys securities from issuer and sells to investors during IPO)
what are the 2 types of underwriting?
- firm commitment
2. best efforts
what is firm commitment underwriting?
underwriters agree to purchase the securities from the issuer for resale to the public at a specified offering price
what is best efforts underwriting?
where the underwriter is just a pass-through-they pass the securities through the investors (less risk for the underwriter)
definition of a gross spread
what the underwriter receives as a profit; is the difference b/t the offering price and the amount rec’d by the issuer
how does an underwriter make money?
they receive the gross spread
what is a warrant?
a stock option written by an issuer, where a stock can be purchased on a specific date or for a specific price
