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Unformatted text preview: the registration statement during a 20 day period called the
_____ _________ _____ . The securities buyer mu st receive a _____ __________ , which contains mu ch of the
information in the registration statement. (p. 450) 3. A public offering of a new issue may be either a _____ _________ _____ offer or a _____ _________ ______
offer. In this country, mo st securities are sold through a _____ ______ _________ offer, which is an offer to
sell securities to the general public. A _____ _________ ______ offering is an offer to sell com mon stock to
the firm's existing stockholders. A com pany's first public offering of equity securities is called a(n)
_____ _________ _____ offering or _____ _________ ______. A _____ _________ ______ new issue is a new
issue by a com pany that has previously issued securities. (p. 451) | v v 129 | e-Text Main Menu | Textbook Table of Contents | Study Guide Table of Contents 4. For a cash offer, the underwriter, or _____ _________ ______, norm ally buys the securities from the firm and
offers them to the public at a higher price. The difference between the underwriter's buying price and the selling
price to the public is the _____ ____________ __ or _____ _________ ______. If the underwriter purchases the
entire issue, then the issuing firm receives a fixed price for the securities, and the risk associated with the sale of
the securities is transferred to the _____ _________ ______. This procedure is called _____ _________ ______
underwriting. For a _____ _________ ______ offering, the underwriter acts as an agent and receives a
com mission. The _____ _________ ______ bears the risk that securities cannot be sold at the specified price.
(p. 453) 5. One of the mo st difficult tasks for an investmen t banker is the pricing of an IPO. If the price is set too low, the
firm's existing shareholders incur a(n) _____ _________ ______ loss; if set too high, the issue
_____ _________ ______. New issues are typically _____ _________ ______, which is beneficial to new
shareholders, but detrimental to existing shareholders. (p. 455) 6. A firm's _____ _________ ______ may contain a preemp tive right, which specifies that any new issue of
com mon stock mu st be first offered to existing stockholders. That issue is a _____ _________ ______ offering
or _____ ___________ ___ subscription. A specified num ber of rights gives the shareholder the option to buy
a new share at the _____ _________ _____ price during a specified period, after which rights _____ _________ .
(p. 466) 7. In order for a rights offering to succeed, the subscription price mu st be set below the _____ _________ ______.
The num ber of new shares to be issued equals _____ _________ _____. The value of a right equals
_____ _________ ______ minu s the _____ _________ ______. (p. 468) 8. For a rights offering, an investor who is a 'holder-of-record' on the record date receives _____ ________ right(s)
for each share own ed. The _____ _________ _ date is four business days prior to the holder-of-record date. An
investor mu st purchase the stock...
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