Unit 7- Issuing Securities

Question 1

Red Herring

Answer 1

Preliminary Prospectus used to gauge interest

Question 2

Tombstone Advertisements

Answer 2

The ONLY form of adverstisement allowed during cooling off period
provide information about potential availability of securities and anticipated gross proceed

Question 3

access equals delivery model

Answer 3

access to prospectus over internet means the prospects has been delivered

Question 4

Who is responsible for:

FILING REGISTRATION STATEMENT TO SEC?

Answer 4

ISSUER

Question 5

Blue Skying

Answer 5

When issuer files registration statement with states in which it will be selling securities

Question 6

Special Purpose Acquisition Company (SPAC)

Answer 6

blank-check companies, who raise capital through issues in order to buy businesses

Question 7

Primary Offering

Answer 7

proceeds of underwriting go to the issuing corporation

Question 8

Secondary Offering

Answer 8

proceeds of underwriting go to major stockholder who is selling a major portion of holding

Question 9

Split Offering

Answer 9

Combination of primary and secondary offering

Question 10

Shelf Offering

Answer 10

Registration is goof or two years and allows issuer to sell portions of offering over three year period without having to reregister

Question 11

Private Placement

Answer 11

issues sold to institution or small group of wealthy individuals. THERE CAN BE NO PUBLIC SOLICITATION

Question 12

Who signs the underwriting agreement?

Answer 12

Issuer and underwriter

Question 13

Syndicate Manager

Answer 13

Underwriter manager who deals with the issuer

Question 14

Syndicate Agreement

Answer 14

signed by syndicate members detailing each members commitment and liability

Question 15

Selling Group

Answer 15

other firms enlisted by syndicate to help sell secuities

- members have no financial liability

Question 16

Negotiated Underwriting

Answer 16

Underwriter and issuer negotiate offering terms

Question 17

Competitive Bid

Answer 17

potential underwriters submit bids and issuer chooses the one which would result in lowest net interest cost to the issuer (common in municipal offerings)

Question 18

Letter of Intent

Signed by?

Answer 18

underwriter contracts with issuer to buy securities at specified price, quantity and date
SIGNED BY Underwriter and Issuer

Question 19

Market-Out Clause

Answer 19

specifies conditions under which the offering may be cancelled

Question 20

Standy By Underwriter

Answer 20

If company is issuing additional shares, and shareholders don’t exercise premptive rights, the stand by underwriter steps in

Question 21

Best Efforts Underwriting

Answer 21

Broker acts as an agent for selling share, DOES NOT take on risk

Question 22

AON (All or None) Underwriting

Answer 22

underwriter must sell all shares or cancel the underwritin

Question 23

Mini-Max Offering

Answer 23

common in limited partnership offerings

- set minimum issuance and max issuance

Question 24

Underwriting Proceeds

Answer 24

the price at which the underwriters buy stock from the issuer

Question 25

POP

Answer 25

Public Offering Price

Question 26

Underwriting Spread

Answer 26

POP-Underwriting Proceeds

Question 27

Syndicate Manager Fee

Answer 27

10-20%

Question 28

Underwriting Syndicate Fee

Answer 28

20-30%

Question 29

Selling Concession Fee

Answer 29

50-60%

Question 30

Green Shoe Option

Answer 30

allows underwriters to sell up to 15% more shares if high demand

Question 31

REgulation A EXemption

Answer 31

permits issuer to raise up to $5MM in 12 months without full registration (only needs notice of sale and offering circular)

Question 32

Regulation D Exemption

Answer 32

no full registration needed FOR PRIVATE PLACEMENTS if issue is privately placed with max of 35 individuals OR issue is placed with accredited investors that do not need SEC protection

Question 33

Restricted Stock/Unregistered STock

Answer 33

private placement stock

Question 34

Accredited Investor has:

Answer 34

$1MM or more net worth | annual income of $200,000

Question 35

Rule 147 Exemption

Answer 35

offerings that take place in ONLY one state are exempt from full registration

Question 36

Rule 144 Exemption

Answer 36

Rules regulating the sale of control and restricted securities

Question 37

Spinning

Answer 37

practice of allocating shares to individuals who are in position to direct securities business to the firm

Question 38

Rule 144a Exemption

Answer 38

Qualified Institutional Buyers (QIB) - $100MM in assets - no holding period requirements for certain institutional investors in US

Question 39

Rule 145

Answer 39

protects stockholders of company that proposes to reorganize its ownership structure, acquire new company, etc... **REQUIRES STOCKHOLDERS BE SENT PROXY STATEMENT

Question 40

Regulation S

Answer 40

offers and sales made outside the US by US issuers are excluded from registration provisions