2012 Flashcards
Gun jumping is a violation if the co discusses a new issue
after deciding to proceed with an IPO but prior to registration of its shares
If 3 sh holders ea owning 3% of the voting sh of a co agree to vote their Sh together
They need to file a 13d
An open-end fund (mutual fund) must be registered with the
SEC
If an issuer sells sh on a delayed or continuous basis at various times and prices, it’s a
shelf registration
an increase in the producer price index would have an___ impact on the stock price of a manufacturing company
adverse
a fairness opinion is most likely to be used when
a target co’s board is recommending that shholders vote to accept a transaction
a fairness opinion is typically ___ by the sellside adviser and ____ by the target company’s BOD
prepared; reviewed; buyside adviser will not have a chance to review the FO
In order to stabilize, underwriter must make
Disclosure of it’s intention to do so in the prospectus
— can trade under rule 144a, these cannot
Corporate bonds ; open end, unit inv trusts and etfs can’t
Transaction comps would generally – be used when pricing an ipo
Not
An indiv who is ce inactive could still work in a clerical role
But not be paid commission or perform duties of a registered person
Fee that a broker dealer is receiving for advisory work can be found in
The engagement letter
When sell side adviser is doing due Dilig in all cash trans, it’s concerned with —
It’s concerned only w buyers ability to pay
Pik interest incr/ decr int exp
Incr
Most common benchmark for fixed inc sec is
Us treasuries
If a firm can’t record ims btwn employees and clients
Ims are not permitted
Reg a offerings are not aggregated w other offerings made more than
6 mths after completion of the transaction
Married couple w 300k in net income or 1 m net worth is
Accredited investor
Trader using quantitative inv strategy would look at
Numerical data, such as a 10 day moving avg
An asset purchase agreement would not include
Debt covenants
In order for a rep to borrow money from a customer
Member firm must make written procedures in place and customer must be a bank fam member or hve outside relationship w the rep
Written disclosure of a conflict of interest must be made
No later than completion of transaction
A 10q doesn’t include
List of Sh holders
Total takedown might also be referred to as
Underwriting concession or underwritten allowance
Reg s sec can be sold immediately on
Sec designated offshore sec change
Creditor committee in a bankruptcy
Does not perfect liens for secured creditors
In a forward triangular merger where—– as long as at least — of the consideration is stock, — is taxable to —
target become part of a sub,; 50%; Only cash is taxable to target Sh holders
Proxy statement must be provided to Sh holders
At Least 20 days prior to annual mtg
In a reverse triangular merger where —-, as long as at least – of consideration is stock ; — is taxable to –
sub becomes part of target; 80%; cash is taxable to target Sh holders
Following an ipo, security can trade away from it’s primary xchange
Only after share traded on that xchange. Ex nasdaq can trade on 3rd mkt after being traded on Nasdaq
Possibility of stabilization bid
Must be disclosed in the prospectus
If 2 co have a similar p/e but one co has higher ev/ebjtda
A diff in taxes might acct for the diff
A list of co largest sh holders
Can be found in a proxy st
Pre ipo Sh will have a
Legend attached confirming they aren’t registered
Of a registered rep participates in a sec trans. Outside te jurisdiction of their firm but doesn’t receive compensation
Written notice is still required but permission isn’t to the firm
In an all cash trans, what’s not req in proxy
Proxy st isn’t required to incl pro forma financials
If corp insiders but stock
Price of stock will generally rise
When issuer files an amendment to the Registration St
It’ll delay effective date of an offering as the 20 day cooling off period will start
Any transaction involving a transfer of funds from a country w whom us doesn’t do biz or had embargoes
Must be blocked and reported to ofac in 10 days
A cross default clause in a bond debenture will trigger
Default on a specific. Tranche of debt if issuer defaults on any of its default obligation
In a distribution of sec related to M&A, reg m restricted period begins
The day proxy materials are distributed to Sh holders
In a bankruptcy proceeding, administrative claims are paid
Before any recently unpaid wages
Distribution of s corp that reduces an investors basis js considered non taxable return of capital
If it doesn’t reduce the basis, it’s taxable as ordinary income
In a registration st for wks I and seasoned issuers Fin st become outdated if
They’re more than 130 days old at time of filing
In a Regis st for unseasoned non reporting ineligible users fin st are outdated if they’re
More than 135 days old
Trustee isn’t always appointed to manage a firm in bankruptcy
In ch 11 debtor will continue to operate the biz and prepare reorg plan like debtor in procession
Any mnpi learned during due Dilig
Should be reported to firm’s compliance
Min price to book ratio is
Not a listing criteria for Nasdaq
Lock up period is designed to prevent
Immediate flipping of new issue and to force co mgmt to continue holding shares
When an issuer requests to accelerate the effective date of an sec filing
Sec will review. Info to insure issuer submitted all req data
In a 2 step merger—? What’s first and second step?
Tgt Sh holders don’t get to vote
1- sell Sh in tender
2 squeeze out remaining Sh holders w a short form merger agreement
Piggyback Regis rights allow investors to
Sell previously unregistered sh at the issuers exp when issuer registers public offering
Co delisted for NYSE or Nasdaq can be quoted on
Pink sheets or otcbb
Co files 10q are the first 3 fiscal qtr and
10k at end of fiscal 4 qtr
Issuer updates fin st in prelim prospectus/ red herring
Must be refilled w sec
In M&A cash transaction acquirer Sh holder approval
Is not required
Reg s-k req an issuer to disclose the name of ea director who
Attendee less than 75% of board mtfs during prev yr
Sec filing issuer not permitted to file s-3 may still publish
Free writing prospectus after Regis st has been filed
A broker dealer underwriting a new issue for a co whose larger Sh holder owns a signif percentage of co stock
Would be most concerne w block trade that would flood mkt and possibly reduce demand for new issue
In a tender offer where Sh holders offer more than number of Sh being purchased
Tendered Sh are accepted on pro rats basis from only those Sh holders who offered their Sh
Prelim proxy st req for any Sh holder votes involving
Proposed merger. Prelim not req for Sh holders votes for election of directors or accts
Rule 144a allows issuers to sell sec to
Qib within us
Reg s allows us issuers to sell sec to
Non is residents
If new issue is significantly oversubscribed
Lead manager may incr number of shares offered and may incr the offering price
If new issue isn’t expected to close on settlement date
Lead manager must notify finra no later than expected closing date
Definitive proxy st must be filed w the sec at the — time it’s sent to Sh holders
Same
A p/ e ratio is not an effective valuation metric for a co w
Recent operating loss and signif earnings volatility
In a subchapter S corp, a husband and wife are counted
as a single shareholder for purposes of calculating the total number of shareholders
in subchapter S corp, gains and losses are allcoated to investors by
ownership percentage
a covenant requiring the issuer to notify security holders of a pending IPO and giving hose security holders the opp to sell the securities as the issuer’s expense is
piggybck registration rights
a firm is prohibited from disclosing to a client when a
suspicious activity report is filed with regard to client’s activities
—- not be underlying asset in an asset backed security
corporate equipment
if an UW oversells a new issue and the stock is trading BELOW the public offering price in the secondary mkt
The UW would purchase the shares in the open mkt to close the oversold position
if an UW oversells a new issue and the stock is trading ABOVE the public offering price in the secondary mkt
The UW would exercise the green shoe for up to 15% of orig deal to close oversold position
Debt to capitalization =
(LT debt + ST debt) / (LTD + STD + Sh Eq)
When a co repurchses stock, acquisition cost is
subtracted from SE
It would be more beneficial for a co to file for bankruptcy than
negotiate w creditors if it expects to pay a large legal settlement or has poor operational issues
A foreign co selling securities in the US to accredited investors would/wouldn’t be req to file a registration statement
would NOT
private placement req the — amount of due diligence by the underwriter as a registered offering
same
in a private placement investors should expect to receive substantially similar info as
in a registered offering
If a registered rep is doing an oustanding securities transaction and is receiving non-cash compensation (orderflow, commission)
approval will be required from the firm
Canadian co do not issue ADRs to trade in the US
they issue C/S. Only Canada can issue sh directly, everyone else use american depository receipts
If a co using FIFO acctg for COGS purchases a co using LIFO acctg, pro-forma adjustments to acquirer will require — in COGS and – in tax provisions
increase, decrease
Aftr reporting risk factors on a 10K, co is required to report any material changes to those risk factors
in the next 10Q
IRS Rule 338(h)10 allow purchaser to treat equity acquisition as — and benefit from —
an asset sale for tax purpose, and subsequently benefit from a stepped up basis (bc seller realize taxable gain so must compensate purchaser)
if an acquirer pays a golden parachute to an exec of target co in excess of 3x the indiv’s avg compesnation for the last 5 yrs, the amount of excess is
NOT tax deductible, also recipient will be rquired to pay a 20% excise tax
-Rule is >3x and for last 5 yrs
If a new entrant enters an established industry and co’s competitors have no discernable loss of rev or mkt share, likely that the co
found a new niche mkt to target w its product
When a B/D prepares a fairness opinion for the acquirer’s BOD
sell-side adviser and Tgt BOD will not preview the opinion
Quote of 27.10-27.20 means
bid price is 27.10 and offer price is 27.20, bid always before offer
preliminary prospectus considered neither a
an offer nor solicitation for securities
profits from an investment in subchapter S corp are
never eligible for capital gains tax rate. S corp - no dbl txation
Profits from an investment in a subchapter C corp are
eligible for capital gains tax rates if held for more than 1 yr. C-corp get dbl taxation
increase in capacity utilization index would indicate
economic recovery in manufacturing sector
When pricing an IPO, lead manager would not consider the shares allocated to ea syndicate member
but would consider the number of IOIs indicAtion if interest accepted, oversubcription of recent deals and pricing of recent deals
if a client is participating in a broad auction and wants to make their bid more attractive without overpaying
co could offer shorter time to close
if a rep is terminated from a firm, rep has
2 yrs to re-associate w another member firm before being required to retake an exam
securities issued under Reg S can trade
immediately on an offshore securities exchange
an issuer would want its registration to be made effective on
the day that it prices its offering
Which includes audited financial statements
10K’s not 10Qs
NYSE and Nasdaq co are required to have —- on their audit committees
financial expert
company execs could be investors in a
Reg D Private placement
to expand the universe of comparables for a niche manufacturer
banker might look at 1. a supplier that distributes manufacturing products in the same line of biz and 2. a co manufacturing in a niche mkt 3. Manufacturer of a different product
NOT the same one as the subject co or a marketing company for the exact same niche product?
unsecured creditors committee doesn’t
perfect liens on assets
direct manufacturing costs are example of
variable cost
