ch 10 - Chapter 10 Stock Offerings and Investor Monitoring...

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1 Chapter 10 Stock Offerings and Investor Monitoring
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2 How Equity Financing Works
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3 Private Equity Stock of non-publicly traded firms Financing Venture Capital Private equity funds
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4 Public Equity Ownership and voting rights The owners are permitted to vote on key matters concerning the firm Preferred stock an equity interest in a firm that usually does not allow for significant voting rights, but pays a pre- specified dividend Preferred stock vs. bonds
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5 Initial Public Offerings (IPO) An IPO is a first-time offering of shares by a specific firm to the public Process of going public An investment banking firm normally serves as the lead underwriter for the IPO Prospectus provide investors with the information they need to decide whether to invest in the firm Road show
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6 IPO Pricing The offer price is determined by the lead underwriter Book-building Transaction costs The issuing firm typically pays 7% of the funds raised
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7 Book-building
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8 IPO Underwriter efforts to ensure price stability The lead underwriter’s performance can be measured by the movement in the IPO shares following the IPO Lockup provision Timing of IPOs IPOs tend to occur more frequently during bullish stock markets
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9 Long-term performance of IPOs IPOs perform poorly on average over a period of a
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This document was uploaded on 11/29/2009.

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ch 10 - Chapter 10 Stock Offerings and Investor Monitoring...

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