Exam 19: Raising Capital

Rowyn placed an order with her broker to purchase 300 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $16 a share.She received allocations of 300 shares of A,240 shares of B,and 50 shares of C.On their respective first days of trading,Stock A closed at $15 a share,Stock B closed at $16 a share,and Stock C closed at $22 a share.What is her combined total first-day profit or loss on these three IPOs?

The Green Shoe option is most apt to be exercised when an IPO is ________ and ________.

What is the length of the SEC registration waiting period?

Disaster Cleanup stock sells for $29 a share.The firm has a rights offer outstanding for new equity shares.Antonio currently owns 400 shares.He just received one right for every share he owns.To purchase one new share he must submit five rights and $22.What is the value of one right?

Which of the following have been offered as justification for stock price declines following an SEO announcement? I.Investors assume managers issue stock when shares are overvalued. II.Corporate taxes imposed on stock offerings lower the value of the issuer's cash flows. III.Issuing equity may be considered a signal that the issuer has too much debt. IV.Issue costs reduce the value of the issuing firm.

Kitchens and More is an all-equity firm with 125,000 shares of stock outstanding.The book value per share is $22,and the market-to-book ratio is 2.4.The current net income is $166,250.An expansion project will cost $1.08 million.Assume the price-earnings ratio remains constant.By what amount must the new project increase the net income for the stock price to remain constant?

Which one of the following statements is correct?

Prior to receiving SEC approval,a company selling new securities can

Currently,you own 7 percent of the outstanding stock of Metals Unlimited.The firm has decided to issue additional shares of stock and has given you the first option to purchase 7 percent of those additional shares.Which one of the following will you be participating in if you opt to purchase the shares you have been offered?

Which one of these statements is correct?

Going public offers which two major benefits?

The difference between the price an underwriter pays to a securities' issuer and the price at which the securities are offered for sale is called the

Denver Mines is offering 50,000 shares of stock to the public in a best efforts cash offer.The offer price is $48 a share and the underwriter's spread is 9.3 percent.The administrative costs are estimated at $320,000.How much will Denver Mines net from this stock offering assuming 95 percent of the issue is sold?

Assume ABC stock declines by 2 percent following the announcement of a new stock offering.Also assume the prices in the overall market remained steady on the announcement date.ABC's price decline is best categorized as

Isaac placed an order with his broker to purchase 300 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $24 a share.He received allocations of 300 shares of A,25 shares of B,and 250 shares of C.On their respective first days of trading Stock A closed at $20 a share,Stock B closed at $29 a share,and Stock C closed at $25 a share.How much less did he earn on his combined first day of trading than he would have had he received his full allocation of shares for all three stocks?

The primary purpose of a lockup agreement is to ensure

Galactic Travel wants to do an IPO but is quite concerned that the underwriters might underprice the issue.Which one of the following might the firm consider to address this concern?

The specified period of time following an IPO when insiders are prevented from selling their shares is called the:

BL Timber stock sells for $48 a share.The firm has a rights offer outstanding for new equity shares.Lisa is a current stockholder and owns 350 shares.She just received one right for every share she owns.To purchase one new share she must submit four rights and $40.What is the value of one right?

Which stage of venture capital financing provides the funding needed to develop a working model of a new product?