28.1: Business Structures

Question 1

Enterprise value (EV) = …

Answer 1

Enterprise Value = Market Value of Shares + Market Value of Debt – Cash

Question 2

What is a Private Placement Memorandum? PPM

Answer 2

A legal document used in the purchase of private company shares that describes the business, the terms of the offering, and the risks involved in making an investment in the company.

Question 3

In which ways can a private company go public?

Answer 3

IPO;
Direct Listing (DL);
Acquisition;
Special Purpose Acquisition Company (SPAC).

Question 4

What is a direct listing? and how does it differ from IPO?

Answer 4

Company goes public.

1-Does not involve an underwriter
2-Shares are sold by existing shareholders

Question 5

What are the two ways a public company may go private?

Answer 5

Leveraged buyout LBO - an acquirer purchases the company using a lot of debt.

Management buyout MBO - company’s management buy the company using a lot of debt.