Ch 2 Deck 2

Question 1

Offering in which issuer solicits bids for the offer and chooses an underwriter

Answer 1

Competitive Offering

Question 2

Competitive Offerings are more common for

Answer 2

Municipal offerings

Question 3

In Competitive offerings, underwriters are chosen by

Answer 3

lowest net interest cost

Question 4

Shelf registrations are often filed when

Answer 4

market conditions are not favorable for an initial public offering to occur

Question 5

type of registration in which an issuer may carry out all the necessary registration procedures ahead of time then wait for favorable conditions

Answer 5

shelf registration

Question 6

Rule 415(a) imposes a 3 year time limitation on shelf offerings of what types?

Answer 6

1. Mortgage-backed debt offerings
2. Continuous offerings lasting more than 30 days
3. Offerings by S-3/F-3 issuers

Question 7

Rule 415(a) imposes a 2 year time limit on shelf registrations of what type?

Answer 7

Business combinations

Question 8

Who is eligible for an automatic shelf registration?

Answer 8

S-3 filers (by checking box on form)

Question 9

Type of securities for which a shelf registration be used

Answer 9

both Debt and Equity

Question 10

PIPE investors are allowed to trade in the stock after the close of the deal if

Answer 10

an 8-K has been filed after close

Question 11

Shares sold in a PIPE transaction are typically sold at a

Answer 11

discount to market price

Question 12

agreement by the underwriter to buy the shares of an offering at a discount and resell them to investors at a public offering price.

Answer 12

Firm Commitment

Question 13

Underwriter is responsible for the marketing and sale of the securities in a

Answer 13

Firm Commitment agreement

Question 14

Who assumes all risk of offering in Firm Commitment underwriting

Answer 14

Underwriter

Question 15

underwriter does not guarantee all shares will be sold in a

Answer 15

Best efforts commitment

Question 16

underwriter must sell a minimum number of shares or the offering is cancelled in a

Answer 16

Mini-max

Question 17

In a Mini-max agreement after the minimum number of shares sold is met, the remaining shares are sold

Answer 17

on a best-efforts basis

Question 18

either the underwriter sells all the shares or the offering is voided

Answer 18

All-or-none (AON)

Question 19

Rule 15c2-4 requires payments to be escrowed for securities in an independent bank for what types of offerings?

Answer 19

“All or None” and “Mini-max”

Question 20

Under Rule 15c2-4, escrowed payments for securities are sent to issuer if

Answer 20

1. terms of offering are met

2. all the specified shares are sold within a specified time period

Question 21

Under Rule 15c2-4, if terms of the offering are not met, escrowed payments of securities

Answer 21

will be returned to the investors

Question 22

Under Rule 15c2-4, broker dealers must transmit

Answer 22

money promptly when making a trade

Question 23

underwriting type used to allow shareholders to retain proportional ownership in an issue of additional stock

Answer 23

standby underwriting (in conjunction with a rights offering)

Question 24

to allow proportional ownership, stock is offered to existing shareholders

Answer 24

at a discount before the follow on offering

Question 25

a firm commitment to buy up any shares that were not bought (in a rights offering designed to allow proportional ownership) in a firm commitment.

Answer 25

Standby underwriting

Question 26

Lead underwriter otherwise known as

Answer 26

managing underwriter book runner book manager

Question 27

opposite of firm commitment offering is

Answer 27

best efforts offering

Question 28

Two types of best efforts underwriting

Answer 28

``` Mini Max (Part or none) All or none ```

Question 29

Under 15c2-4 the escrow agent for best efforts offerings may invest in

Answer 29

bank accounts bank money market accounts short term CDs issued by the bank short term securities issued by the US Government

Question 30

Under 15c2-4 the escrow agent for best efforts offerings may not invest in

Answer 30

``` money market funds Corporate equity or debt securities Repurchase agreements Banker acceptances Commercial paper Municipal securities ```

Question 31

Under 15c2-4 prompt delivery of payment from prospective purchasers to the escrow agent means

Answer 31

By noon of the next business day after receipt

Question 32

Under 15c2-4 escrow agent must be

Answer 32

a US commercial bank that is unaffiliated with either the issuer or the underwriter

Question 33

a rights offering occurs right before

Answer 33

a follow-on offering

Question 34

What is the risk of the selling group?

Answer 34

NO financial risk, only a benefit if they sell

Question 35

Public company raises funds by selling shares in a public offering

Answer 35

Private Investment in Public Equity

Question 36

PIPE stands for

Answer 36

Private Investment in Public Equity

Question 37

Because a PIPE is a private transaction it does not need to be registered

Answer 37

before the deal closes

Question 38

Most companies register PIPE's after the deal closes so that

Answer 38

the investors are not subject to resale restrictions

Question 39

After a PIPE transaction closes, companies typically file

Answer 39

an 8-K form

Question 40

Filing an 8-K form after a PIPE transactions to disclose

Answer 40

any material non-public information that was revealed to the PIPE investors

Question 41

Revealing material non-public information that was revealed to the PIPE investors with an 8-K after the transaction allows

Answer 41

investors to not be precluded from trading in the stock after the close of the deal (because of insider trading restrictions)

Question 42

Prior to investing in a PIPE, many investors will require assurance that

Answer 42

an 8-K will be filed after the close of the deal

Question 43

What effect can a PIPE transaction have on earnings per share?

Answer 43

A dilutive effect

Question 44

Because of possible dilution, PIPE issuers are required by file a notification form by NASDAQ if the transaction resulted in

Answer 44

an increase of 5% or more of the shares outstanding

Question 45

If a PIPE issuer is required to file a notification form because the transaction resulted in an increase of 5% or more of the shares outstanding (dilution), they must file it within

Answer 45

10 days of the closing

Question 46

What is the limit on the number of shares that can be sold in a PIPE transaction?

Answer 46

There is no limit

Question 47

NASDAQ and the exchanges require that if a company sells more than 20% of its outstanding common stock in a PIPE transaction, the shares must be sold

Answer 47

at or above the fair market price unless the company obtains shareholder approval.

Question 48

If a company issuing a PIPE is not selling more than 20% of its outstanding common stock, the shares can be sold

Answer 48

at either above or below the market price

Question 49

Shares sold in a PIPE transaction are typically sold at a

Answer 49

discount to the market price