Unformatted text preview: value of a right is
$0.2381 = $25 – $24.7619 Managerial Finance 0 19.7 The Rights Puzzle
Over 90% of new issues are underwritten, even though
rights offerings are much cheaper.
A few explanations:
Underwriters increase the stock price. There is not much
evidence for this, but it sounds good.
The underwriter provides a form of insurance to the issuing
firm in a firm-commitment underwriting.
The proceeds from underwriting may be available sooner than
the proceeds from a rights offering. No one explanation is entirely convincing.
Managerial Finance 1 19.8 Shelf Registration
Permits a corporation to register an offering that
it reasonably expects to sell within the next two
Not all companies are allowed shelf registration.
The firm must be rated investment grade.
The cannot have recently defaulted on debt.
The market capitalization must be > $75 m.
No recent SEC violations.
Managerial Finance 2 19.9 The Private Equity Market
The previous sections of this chapter assumed
that a company is big enough, successful enough,
and old enough to raise capital in the public
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- Spring '12
- Corporate Finance