Fin 311 - Chapter 16 - Raising Capital, Part 6

Front 1

Venture capital (VC)

Back 1

Financing for new, often high-risk ventures

Front 2

Registration statement

Back 2

A statement filed with the SEC that discloses all material information concerning the corporation making a public offering.

Front 3

Regulation A

Back 3

An SEC regulation that exempts public issues of less than $5 million from most registration requirements.

Front 4

Prospectus

Back 4

A legal document describing details of the issuing corporation and the proposed offering to potential investors.

Front 5

Red herring

Back 5

A preliminary prospectus distributed to prospective investors in a new issue of securities.

Front 6

Tombstone

Back 6

An advertisement announcing a public offering.

Front 7

General cash offer

Back 7

An issue of securities offered for sale to the general public on a cash basis.

Front 8

Rights offer

Back 8

A public issue of securities in which securities are first offered to existing shareholders. Also called a rights offering.

Front 9

Initial public offering (IPO)

Back 9

A company's first equity issue made available to the public. Also called an "unseasoned new issue" or an "IPO"

Front 10

Seasoned equity offering (SEO)

Back 10

A new equity issue of securities by a company that has previously issued securities to the public.

Front 11

Underwriters

Back 11

Investment firms that act as intermediaries between a company selling securities and the investing public.

Front 12

Syndicate

Back 12

A group of underwriters formed to share the risk and to help sell and issue.

Front 13

Gross spread

Back 13

Compensation to the underwriter, determined by the difference between the underwriter's buying price and offering price.

Front 14

Firm commitment underwriting

Back 14

The type of underwriting in which the underwriter buys the entire issue, assuming full financial responsibility for any unsold shares.

Front 15

Best efforts underwriting

Back 15

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.

Front 16

Dutch action underwriting

Back 16

The type of underwriting in which the offer price is set based on competitive bidding by investors. Also known as a "uniform price auction."

Front 17

Green Shoe provision

Back 17

A contract provision giving the underwriter the option to purchase additional shares from the issuer at the offering price. Also called the "overallotment option."

Front 18

Lockup agreement

Back 18

The part of the underwriting contract that specifies how long insiders must wait after an IPO before they can sell stock.

Front 19

Ex-rights date

Back 19

The beginning of the period when stock is sold without a recently declared right, normally two trading days before the holder-of-record date.

Front 20

Holder-of-record date

Back 20

The date on which existing shareholders on company records are designated as the recipients of stock rights. Also, the date of record.

Front 21

Standby underwriting

Back 21

The type of underwriting in which the underwriter agrees to purchase the unsubscribed portion of the issue.

Front 22

Standby fee

Back 22

An amount paid to an underwriter participating in a standby underwriting agreement.

Front 23

Oversubscription privilege

Back 23

A privilege that allows shareholders to purchase unsubscribed shares in a rights offering at the subscription price.

Front 24

Dilution

Back 24

Loss in existing shareholder's value in terms of ownership, market value, boo value, or EPS.

Front 25

Term loans

Back 25

Direct business loans of typically one to five years.

Front 26

Private placements

Back 26

Loans (usually long-term) provided directly b a limited number of investors.

Front 27

Private placements

Back 27

Loans (usually long-term) provided directly b a limited number of investors.

Front 28

Shelf registration

Back 28

Registration permitted by SEC Rule 415, which allows a company to register all isues it expects to sell within two years at one time, with subsequent sales at any time within those two years.

Front 29

Shelf registration

Back 29

Registration permitted by SEC Rule 415, which allows a company to register all isues it expects to sell within two years at one time, with subsequent sales at any time within those two years.