Karteikarten
Public and Private Financing: Initial offerings and seasoned offerings
Karten in diesem Stapel (17)
- 1What are the different types of financing available to a private company?Friends and family, Bank loans, Angel investors, Venture Capital Funds
- 2What are the 5 ways to raise funds in the capital market?Private placement
IPO
Seasoned equity offering
The valuation of rights issues
Asset securitisation - 3What is private placement?the sale of stocks, bonds or securities to a private investor. 2 types: Angel investors and Venture Capitalists
- 4What is an Angel Investor?Someone that provides the first round of external financing to start up companies
- 5What do angel investors receive in return for their investment?Shares and perhaps a seat on the board of directors
- 6What is venture capital?A pool of institutional investors investing money to provide funds for companies
- 7What is a VC and what do they do?Venture Capitalists are managers of the fund. They sit on the boards of the companies they fund and do this by lending the funds to companies and receiving interest before distributing it to the other investors
- 8What does it mean to go public?selling some of a company's shares to outside investors in an IPO then letting the share trade in public markets
- 9Public offeringsecurities are offered to the public and must be registered with the SEC (USA) or the FSA (UK)
- 10Give a few advantages of going public- Diversification of stockholders
- Increased liquidity
- Increases customer recognition/exposure
- Makes it more feasible to use stock as employee incentives. - 11Give a few disadvantages of going public- Must file numerous reports
- Operating data must be disclosed which is available to competitors
- Managing investor relations is time consuming
- Special deals to insiders more difficult - 12What are seasoned equity offerings?Aka secondary/follow up offerings.
Company issues additional shares
Offer price based on existing price - 13What is a rights issue?Giving existing shareholders the right to buy new shares first or sell the right to buy. --> Maintains their wealth
Given in proportion to their existing holdings - 14Theoretical ex-right price formula
- 15How do you calculate the right Value per new share after a rights issue?Theoretical ex-right price - new price
- 16What happens to shareholders that do not take up their right?They are in danger as their holdings are diluted
- 17How does a public company go private?Managers and outside investors team up to purchase all publicly held shares. This is called a Leveraged Buyout (LBO)