Exam 20: Issuing Securities to the Public

Suppose that the company was also considering structuring the rights issue to allow for an additional share to be purchased for 10 rights at a subscription price of $3.Prove that a stockholder with 100 shares would be indifferent between purchasing a new share for 10 rights at $3 or purchasing a new share for 20 rights at $6.

The Direct Interactive Publishing Company is planning to raise $200 million dollars in new capital.There are currently 50 million shares outstanding with an estimated market price of $60 each.The corporate officers are debating whether to use a rights offering (with or without a standby underwriting) or have the issue fully underwritten.The company is currently listed on a regional exchange and plans to list on a national exchange after the security issue.List and explain three advantages/disadvantages of each method.

The green shoe option is used to:

Assuming everything else is constant, if a stock's old price is $25 and the ex-rights or new stock price is $19, then the value of the right is:

The first public equity issue that is made by a company is referred to as:

The Holyoke Corporation has 120,000 shares outstanding with a current market price of $8.10 per share. The company needs to raise an additional $36,000 to finance new expenditures, and has decided on a right issue. the issue will allow current stockholders to purchase one additional share for 20 rights at a subscription price of $6 per share. -If the ex-rights price were set at $7.90, would you as a potential new stockholder choose to buy shares ex-rights or buy shares at the old price and exercise your rights?

A company must file a registration statement with the SEC providing various financial and company history information.The registration statement does not need to be filed if:

Empirical evidence suggests that upon announcement of a new equity issue, current stock prices generally:

Discuss what a Dutch auction is and how it works.

Corporations are allowed to use the shelf registration method if they:

Arguments to explain why most equity issues are underwritten versus sold through a rights offering are:

The Holly Corporation has a new rights offering that allows you to buy one share of stock with 4 rights and $25 per share.The stock is now selling ex-rights for $30.The price rights-on is:

Rule 144A provides the framework for the issuance of private securities to qualified institutional investors.To buy private securities, institutional investors:

A group of investment bankers who pool their efforts to underwrite a security are known as a(n):

The offering price is set to make an issue attractive to the market and provide a good price to the issuer.Which of the following is/are true?

A standby underwriting arrangement provides the:

During the SEC waiting period the potential issuing company can issue a preliminary prospectus which contains:

To determine the value of a rights offering, the stockholder needs to know the following two pieces of information in addition to the current stock price:

Bradley Power wants to raise $40 million in new equity.The subscription price is $25.There are currently 5 million shares outstanding, each with 1 right.How many rights are needed to purchase 1 share?

Investment banks perform which of the following services for corporate issuers: