chapter 10 note - Omar M Al Nasser Ph.D MBA Visiting...

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Omar M. Al Nasser, Ph.D., MBA. Visiting Assistant Professor of Finance School of Business Administration University of Houston-Victoria Email: [email protected] Chapter 10 Stock Offerings and Investor Monitoring Outline Private Equity Financing by Venture Capital Funds Financing by Private Equity Funds Public Equity Ownership and Voting Rights Preferred Stock Participation in Stock Markets Initial Public Offerings Process of Going Public Underwriter Efforts to Ensure Price Stability Timing of IPOs Initial Returns of IPOs Google s IPO Abuses in the IPO Market Long-Term Performance Following IPOs Impact of the Sarbanes-Oxley Act on IPOs Secondary Stock Offerings Shelf-Registration Stock Exchanges Organized Exchanges Over-the-Counter Market Electronic Stock Exchanges Extended Trading Sessions Stock Quotations Provided by Exchanges Stock Index Quotations
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Monitoring by Investors Accounting Irregularities Sarbanes-Oxley Act Shareholder Activism Shareholder Lawsuits Monitoring by Financial Managers Stock Repurchases Market for Corporate Control Barriers to the Market for Corporate Control Globalization of Stock Markets Foreign Stock Offerings in the United States International Placement Process Global Stock Exchanges Emerging Stock Markets Methods Used to Invest in Foreign Stocks POINT/COUNTER-POINT: Should a Stock Exchange Enforce Some Governance Standards on the Firms Listed on the Exchange? POINT: No. Governance is the responsibility of the firms, and not the stock exchange. The stock exchange should simply ensure that the trading rules of the exchange are enforced and should not intervene in the firms governance issues. COUNTER-POINT: Yes. When a stock exchange enforces governance standards such as requiring a firm to have a majority of outside members on its board of directors, it can enhance the credibility of the exchange. WHO IS CORRECT? Use the Internet to learn more about this issue. Offer your own opinion on this issue. ANSWER: An exchange and the listed firms can be viewed as more credible if there are governance standards. However, the credibility of an exchange is questionable if it cannot properly monitor itself properly (as was the case for the NYSE when the board allowed some excessive compensation to executives who managed the exchange). Questions 1. Shareholder Rights. Explain the rights of common stockholders that are not available to other individuals. ANSWER: Common stockholders are permitted to vote on key matters concerning the firm such as the election of the board of directors, authorization to issue new shares of common stock, approval of amendments to the corporate charter, and adoption of by-laws. 2. Stock Offerings. What is the danger of issuing too much stock? What is the role of the investment
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bank that serves as the underwriter, and how can it ensure that the firm does not issue too much stock?
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