Ch. 3 Underwriting Flashcards
Who prepares are firms offering documents?
Corporate Financing Department
Does a block trade expose an underwriter to a larger amount of capital risk than a one-day or fully marketed road show?
Yes
When must final settlement of a syndicate account occur?
90 days
What does the Green Shoe Clause permit?
A maximum of 15% additional shares to be issued and is good for 30 days
In a best-efforts underwriting, underwriters charge a higher or lower underwriting fee?
Lower, since they are not committing any capital
For a syndicate short covering transactions, if the stock is trading above the IPO price, the _____ should be exercised; if it is trading below the IPO price, the share should be ______.
If above - Green Shoe Clause; if below - purchased in the open market
T/F: Prior to the IPO date, if the syndicate manager believes the offering is over-subscribed, it may notify the issuer and the issuer may choose to increase the number of shares and/or offering price
True
T/F: If an offering is being done exclusively by selling shareholders, the issuer will not receive any of the proceeds
True
Are a syndicate’s expenses deducted from the underwriting fees?
Yes
Can a research analyst attend a road show for an investment banking deal?
No
Can an investment banker contact a research analyst to demand the increase of its stock rating?
No
While distributing securities, is a firm permitted to ask clients about the price that they would be willing to pay for the stock in the secondary market?
No
Where is the possibility of placing a stabilized bid disclosed?
Prospectus
Where can a stabilizing bid be entered?
At the lower of the offering price or highest independent bid
What is used by an underwriting syndicate primarily to expand the distribution of the securities being offered.?
Selling group
What is a discount to the POP and is the fee that’s paid to a broker-dealer that contacts an underwriting member to purchase part of a new issue to fill its own customer orders?
Reallowance
What is the typical underwriting fee %?
7% (of offering proceeds)
For an underwriting fee, maximum compensation that’s generally considered fair and reasonable will vary directly with the amount of ____ being assumed
Risk being assumed
T/F: A member of a BD’s investment banking department is permitted to be included on the committee that reviews and approves the compensation of a research analyst
False
An RA who’s employed by any member of the syndicate or selling group may NOT prepare a research report on an IPO for _____ days (____ period).
10 days; quiet period
How long is the quiet period for a follow on offering?
(3) calendar days and only applies to the manager / co-manager
Do the (3) and (10) day quiet periods apply to Emerging Growth Companies?
No
T/F: In order for a security to be listed on the NYSE or Nasdaq, a majority of the members of the company’s board of directors must be independent
True
Is an issuer required to maintain a minimum price/book or PE ratio to be listed on the NASDAQ?
No
T/F: The OTCBB is a quotation system for securities that are NOT listed on either the NYSE or Nasdaq
True
