IFM10 Ch18 Lecture - CHAPTER18 ,Investment...

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  1 CHAPTER 18 Initial Public Offerings, Investment  Banking, and Financial  Restructuring
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  2 Topics in Chapter Initial Public Offerings Investment Banking and Regulation The Maturity Structure of Debt Refunding Operations The Risk Structure of Debt
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  3 What agencies regulate  securities markets? The Securities and Exchange  Commission (SEC) regulates: Interstate public offerings. National stock exchanges. Trading by corporate insiders. The corporate proxy process.  The Federal Reserve Board controls  margin requirements. (More...)
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  4 States control the issuance of securities  within their boundaries. The securities industry, through the  exchanges and the National Association  of Securities Dealers (NASD), takes  actions to ensure the integrity and  credibility of the trading system. Why is it important that securities  markets be tightly regulated?
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  5 How are start-up firms usually  financed? Founder’s resources Angels Venture capital funds Most capital in fund is provided by  institutional investors Managers of fund are called venture  capitalists Venture capitalists (VCs) sit on boards of  companies they fund
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  6 Differentiate between a private  placement and a public offering. In a private placement, such as to  angels or VCs, securities are sold to a  few investors rather than to the public at  large. In a public offering, securities are  offered to the public and must be  registered with SEC. (More...)
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  7 Privately placed stock is not registered,  so sales must be to “accredited” (high  net worth) investors. Send out “offering memorandum” with 20- 30 pages of data and information, prepared  by securities lawyers.   Buyers certify that they meet net  worth/income requirements and they will  not sell to unqualified investors.
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  8 Why would a company consider going public? Advantages of going public Current stockholders can diversify. Liquidity is increased. Easier to raise capital in the future. Going public establishes firm value. Makes it more feasible to use stock as  employee incentives. Increases customer recognition. (More...)
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  9 Disadvantages of Going  Public Must file numerous reports. Operating data must be disclosed.
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