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Lecture 6- Raising capital

Deleted user 42 questions Updated 12 Jul 2021

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1Private equity is general term that describes all kinds of [blank_start]funds[blank_end] that [blank_start]pool[blank_end] money from number of [blank_start]investors[blank_end] in order to amass [blank_start]large[blank_end] amounts of money. They’re then used to acquire [blank_start]stakes[blank_end] in companies
1. Afunds
2. Bpool
3. Cinvestors
4. Dlarge
5. Estakes
2Non-venture part of private equity is often associated with [blank_start]funds[blank_end] looking for mature, [blank_start]revenue[blank_end] generating companies in need of some [blank_start]revitalisation[blank_end] (associated with [blank_start]buying[blank_end] companies)
1. Afunds
2. Brevenue
3. Crevitalisation
4. Dbuying
3Private equity mainly comes from [blank_start]institutional[blank_end] investors & [blank_start]accredited[blank_end] investors, who can dedicate [blank_start]substantial[blank_end] sums of money for [blank_start]extended[blank_end] time periods
1. Ainstitutional
2. Baccredited
3. Csubstantial
4. Dextended
4Private placement- [blank_start]Non-public[blank_end] sale of securities to [blank_start]limited[blank_end] number of [blank_start]investors[blank_end]
1. ANon-public
2. Blimited
3. Cinvestors
5Venture capital is like sub section of [blank_start]private equity[blank_end] but often goes into [blank_start]younger[blank_end] companies, generally with [blank_start]high[blank_end] level of risk. Venture capitalists make [blank_start]money[blank_end] by finding good deals in [blank_start]young[blank_end] businesses. They offer to [blank_start]invest[blank_end] set amount of money for [blank_start]stake (share)[blank_end] in company
1. Aprivate equity
2. Byounger
3. Chigh
4. Dmoney
5. Eyoung
6. Finvest
7. Gstake (share)
6Venture capitalists may want [blank_start]say[blank_end] in how company is [blank_start]run[blank_end]. Also, they may own [blank_start]portion[blank_end] of business, but compared to [blank_start]private equity[blank_end] firms they rarely buy company [blank_start]outright[blank_end]
1. Asay
2. Brun
3. Cportion
4. Dprivate equity
5. Eoutright
7Suppliers of venture capital include: old-line [blank_start]wealthy[blank_end] families, private [blank_start]partnerships[blank_end] & [blank_start]corporations[blank_end] (who provide [blank_start]investment[blank_end] funds), large [blank_start]industrial[blank_end] or [blank_start]financial[blank_end] corporations (who have established venture capital [blank_start]subsidiaries[blank_end]) & [blank_start]business angels[blank_end] (investors that act as [blank_start]individuals[blank_end] when providing financing who are not part of [blank_start]partnership[blank_end] or [blank_start]corporation[blank_end])
1. Awealthy
2. Bpartnerships
3. Ccorporations
4. Dinvestment
5. Eindustrial
6. Ffinancial
7. Gsubsidiaries
8. Hbusiness angels
9. Iindividuals
10. Jpartnership
11. Kcorporation
8First stage of private equity financing is [blank_start]seed money[blank_end]. [blank_start]Small[blank_end] amount of financing needed to prove [blank_start]concept[blank_end] or develop [blank_start]product[blank_end] & [blank_start]marketing[blank_end] is normally not included in this stage
1. Aseed money
2. BSmall
3. Cconcept
4. Dproduct
5. Emarketing
9Second stage of private equity financing is [blank_start]start-up[blank_end]. [blank_start]Financing[blank_end] for firms that started within [blank_start]past year[blank_end] & [blank_start]funds[blank_end] are likely to pay for marketing & product [blank_start]development[blank_end] expenditure
1. Astart-up
2. BFinancing
3. Cpast year
4. Dfunds
5. Edevelopment
10Third stage of private equity financing is [blank_start]later stage capital[blank_end]. [blank_start]Additional[blank_end] money is contributed to business to begin [blank_start]sales[blank_end] & [blank_start]manufacturing[blank_end] after firm has spent its start-up [blank_start]funds[blank_end]
1. Alater stage capital
2. BAdditional
3. Csales
4. Dmanufacturing
5. Efunds

11Fourth stage of private equity financing is [blank_start]growth capital[blank_end]. Funds are earmarked [blank_start](set aside)[blank_end] to enable it to reach its [blank_start]potential[blank_end] & achieve [blank_start]successful growth[blank_end]
1. Agrowth capital
2. B(set aside)
3. Cpotential
4. Dsuccessful growth
12Fifth stage of private equity financing is [blank_start]replacement capital[blank_end]. [blank_start]Financing[blank_end] for company to buy out other [blank_start]investors[blank_end] in firm
1. Areplacement capital
2. BFinancing
3. Cinvestors
13Sixth stage of private equity financing is [blank_start]buyout financing[blank_end]. Money provided for [blank_start]managers[blank_end] & outside [blank_start]investors[blank_end] to acquire full functioning [blank_start]firm[blank_end]
1. Abuyout financing
2. Bmanagers
3. Cinvestors
4. Dfirm
14First step in public offering is [blank_start]pathfinder prospectus[blank_end] (several [blank_start]months[blank_end] before issue). An initial indicative [blank_start]prospectus[blank_end] is released that presents [blank_start]proposed[blank_end] offering
1. Apathfinder prospectus
2. Bmonths
3. Cprospectus
4. Dproposed
15Second step in public offering is [blank_start]pre-underwriting conferences[blank_end] (about [blank_start]4 weeks[blank_end] before full prospectus is issued). Amount of money to be [blank_start]raised[blank_end] & type of [blank_start]security[blank_end] to be issued are discussed. [blank_start]Initial[blank_end] expressions of interest collected & issue price is [blank_start]set[blank_end]. [blank_start]Underwriter[blank_end] & approved [blank_start]adviser[blank_end] will be appointed
1. Apre-underwriting conferences
2. B4 weeks
3. Craised
4. Dsecurity
5. EInitial
6. Fset
7. GUnderwriter
8. Hadviser
16Third step in public offering is [blank_start]full prospectus[blank_end] (several [blank_start]weeks[blank_end] before offering takes place). [blank_start]Prospectus[blank_end] contains all relevant [blank_start]financial[blank_end] & [blank_start]business[blank_end] information
1. Afull prospectus
2. Bweeks
3. CProspectus
4. Dfinancial
5. Ebusiness
17Fourth step in public offering is [blank_start]public offering[blank_end] & [blank_start]sale[blank_end] (shortly after [blank_start]last day[blank_end] of registration period). In typical firm commitment contract [blank_start]underwriter[blank_end] buys specified amount of [blank_start]equity[blank_end] from firm & sells it at [blank_start]higher[blank_end] price. [blank_start]Selling group[blank_end] assists in sale
1. Apublic offering
2. Bsale
3. Clast day
4. Dunderwriter
5. Eequity
6. Fhigher
7. GSelling group
18Fifth step in public offering is [blank_start]market stabilisation[blank_end] (usually within [blank_start]30 days[blank_end] of offering). [blank_start]Underwriter[blank_end] stands ready to place [blank_start]orders[blank_end] to buy at [blank_start]specified[blank_end] price on market
1. Amarket stabilisation
2. B30 days
3. CUnderwriter
4. Dorders
5. Especified
19Alternative public issue methods are [blank_start]general cash offer[blank_end] (issue of [blank_start]securities[blank_end] offered for sale to general [blank_start]public[blank_end] on [blank_start]cash[blank_end] basis), [blank_start]rights issue[blank_end] (public issue of [blank_start]securities[blank_end] in which securities are [blank_start]first[blank_end] offered to [blank_start]existing shareholders[blank_end]), [blank_start]initial public offering[blank_end] (company’s first equity issue made to [blank_start]public[blank_end]) & [blank_start]seasoned equity issue[blank_end] (new equity issue of [blank_start]securities[blank_end] by company that has previously issues securities to public)
1. Ageneral cash offer
2. Bsecurities
3. Cpublic
4. Dcash
5. Erights issue
6. Fsecurities
7. Gfirst
8. Hexisting shareholders
9. Iinitial public offering
10. Jpublic
11. Kseasoned equity issue
12. Lsecurities
20Three services that underwriters perform for corporate issuers are [blank_start]formulating (preparing)[blank_end] method used to [blank_start]issue[blank_end] securities, [blank_start]pricing[blank_end] new securities & [blank_start]selling[blank_end] new securities
1. Aformulating (preparing)
2. Bissue
3. Cpricing
4. Dselling
21Underwriter- [blank_start]Investment[blank_end] firms that act as [blank_start]intermediaries[blank_end] between company [blank_start]selling[blank_end] securities & [blank_start]investing[blank_end] public
1. AInvestment
2. Bintermediaries
3. Cselling
4. Dinvesting
22As underwriting involves [blank_start]risk[blank_end], underwriters combine to form underwriting group called '[blank_start]syndicate[blank_end]' to share [blank_start]risk[blank_end] & help [blank_start]sell[blank_end] issues
1. Arisk
2. Bsyndicate
3. Crisk
4. Dsell
23One method of underwriting is [blank_start]firm commitment[blank_end]. [blank_start]Underwriter[blank_end] buys entire issue for [blank_start]less[blank_end] than offering price & accepts [blank_start]risk[blank_end] of not being able to sell them. Difference between underwriter’s [blank_start]buying[blank_end] price & [blank_start]offering[blank_end] price is called [blank_start]spread[blank_end] or [blank_start]discount[blank_end]
1. Afirm commitment
2. BUnderwriter
3. Cless
4. Drisk
5. Ebuying
6. Foffering
7. Gspread
8. Hdiscount
24Another method of underwriting is [blank_start]best efforts[blank_end]. [blank_start]Underwriter[blank_end] acts as agent, receiving commission for each [blank_start]share[blank_end] sold. [blank_start]Underwriter[blank_end] sells as much of issue as possible, but can return [blank_start]unsold[blank_end] shares to issuer without [blank_start]financial[blank_end] responsibility
1. Abest efforts
2. BUnderwriter
3. Cshare
4. DUnderwriter
5. Eunsold
6. Ffinancial
25Third method of underwriting is [blank_start]Dutch auction[blank_end]. [blank_start]Underwriter[blank_end] does not set fixed price for shares to be [blank_start]sold[blank_end]. Instead [blank_start]underwriter[blank_end] conducts auction in which [blank_start]investors[blank_end] bid for shares. Offer price is determined based on submitted [blank_start]bids[blank_end]
1. ADutch auction
2. BUnderwriter
3. Csold
4. Dunderwriter
5. Einvestors
6. Fbids
26Firm commitments are riskier for [blank_start]underwriters[blank_end] as they don’t know [blank_start]how many shares[blank_end] they will sell. However, best efforts are riskier for [blank_start]firms[blank_end] as [blank_start]unsold shares[blank_end] will be returned back to them
1. Aunderwriters
2. Bhow many shares
3. Cfirms
4. Dunsold shares
27Aftermarket- Period after [blank_start]new issue[blank_end] is initially [blank_start]sold[blank_end] to public
1. Anew issue
2. Bsold
28Many underwriting contracts contain [blank_start]green shoe provision[blank_end]. This is contract provision giving [blank_start]underwriter[blank_end] option to purchase [blank_start]additional[blank_end] shares from issuer at [blank_start]offering[blank_end] price. Also it is called [blank_start]over-allotment option[blank_end]
1. Agreen shoe provision
2. Bunderwriter
3. Cadditional
4. Doffering
5. Eover-allotment option
29Almost all underwriting contracts contain [blank_start]lock-up agreement[blank_end]. This is part of underwriting contract that [blank_start]specifies[blank_end] how long [blank_start]insiders[blank_end] must wait after an [blank_start]IPO[blank_end] before they can [blank_start]sell[blank_end] equity
1. Alock-up agreement
2. Bspecifies
3. Cinsiders
4. DIPO
5. Esell
30Quiet period- Period following [blank_start]IPO[blank_end] during which many [blank_start]regulatory[blank_end] authorities place [blank_start]restrictions[blank_end] on public communications of [blank_start]issuer[blank_end]
1. AIPO
2. Bregulatory
3. Crestrictions
4. Dissuer
31Determining correct [blank_start]offering price[blank_end] is most difficult thing an underwriter must do for [blank_start]IPO[blank_end]. If offer price is too high, issue [blank_start]will not be successful[blank_end] & have to be [blank_start]withdrawn[blank_end]. If offer price is too low, firm [blank_start]will not receive[blank_end] as much as it could. There must be some level of [blank_start]underpricing[blank_end] to [blank_start]encourage[blank_end] investors to buy
1. Aoffering price
2. BIPO
3. Cwill not be successful
4. Dwithdrawn
5. Ewill not receive
6. Funderpricing
7. Gencourage
32Underpricing exists because it helps ensure success of [blank_start]security offering[blank_end], rewards [blank_start]IPO investors[blank_end] for purchasing [blank_start]risky[blank_end] securities, addresses issue of '[blank_start]winner's curse[blank_end]' & rewards [blank_start]institutional investors[blank_end] for information they provide to [blank_start]underwriters[blank_end] regarding potential interest in & value of security issue
1. Asecurity offering
2. BIPO investors
3. Crisky
4. Dwinner's curse
5. Einstitutional investors
6. Funderwriters
33Following announcement of new equity issue, share prices generally [blank_start]decrease[blank_end]. Reasons for this are [blank_start]managerial information[blank_end], [blank_start]debt capacity[blank_end] & [blank_start]falling earnings[blank_end]
1. Adecrease
2. Bmanagerial information
3. Cdebt capacity
4. Dfalling earnings
34Costs of new issues are [blank_start]gross spread[blank_end] (consists of [blank_start]direct fees[blank_end] paid by [blank_start]issuer[blank_end] to underwriting [blank_start]syndicate[blank_end]), [blank_start]other direct expenses[blank_end] (incurred by [blank_start]issuer[blank_end] such as [blank_start]filing[blank_end] fees, [blank_start]legal[blank_end] fees & [blank_start]taxes[blank_end]), [blank_start]indirect expenses[blank_end] (costs not reported on prospectus such as management time spent working on new issue), [blank_start]abnormal returns[blank_end], [blank_start]underpricing[blank_end] & [blank_start]green shoe option[blank_end]
1. Agross spread
2. Bdirect fees
3. Cissuer
4. Dsyndicate
5. Eother direct expenses
6. Fissuer
7. Gfiling
8. Hlegal
9. Itaxes
10. Jindirect expenses
11. Kabnormal returns
12. Lunderpricing
13. Mgreen shoe option
35RIghts issue- Only for [blank_start]existing[blank_end] shareholders. Normally firms must sell to [blank_start]existing[blank_end] shareholders before going to [blank_start]public[blank_end]. Shareholders have option to buy [blank_start]specified[blank_end] number of new shares from firm at [blank_start]specified[blank_end] price within [blank_start]specified[blank_end] time. Advantages of rights issue are that it appears to be [blank_start]cheaper[blank_end] for issuing firm than cash offers. Also, firm can do rights issue without using [blank_start]underwriters[blank_end] whereas for cash offer [blank_start]underwriters[blank_end] need to be used
1. Aexisting
2. Bexisting
3. Cpublic
4. Dspecified
5. Especified
6. Fspecified
7. Gcheaper
8. Hunderwriters
9. Iunderwriters
36Shareholder choices in rights issue are [blank_start]exercise rights[blank_end] (buy [blank_start]certain[blank_end] number of shares at [blank_start]certain[blank_end] price within timeframe that company has given them), [blank_start]sell all rights[blank_end] (these [blank_start]rights[blank_end] are tradable), [blank_start]sell some rights[blank_end] to raise financing to buy remainder (exercise part of [blank_start]right[blank_end] & other part of right is [blank_start]sold[blank_end]) or [blank_start]do nothing[blank_end] (let rights [blank_start]expire[blank_end])
1. Aexercise rights
2. Bcertain
3. Ccertain
4. Dsell all rights
5. Erights
6. Fsell some rights
7. Gright
8. Hsold
9. Ido nothing
10. Jexpire
37Subscription price- Price that [blank_start]existing[blank_end] shareholders are allowed to [blank_start]pay[blank_end] for [blank_start]share[blank_end] of equity. It is declared when [blank_start]right[blank_end] is declared
1. Aexisting
2. Bpay
3. Cshare
4. Dright
38Dilution- [blank_start]Loss[blank_end] in existing shareholders’ [blank_start]value[blank_end] in terms of [blank_start]ownership[blank_end], [blank_start]market[blank_end] value, [blank_start]book[blank_end] value or [blank_start]EPS[blank_end]
1. ALoss
2. Bvalue
3. Cownership
4. Dmarket
5. Ebook
6. FEPS
39One way of issuing long-term debt is [blank_start]bank loans[blank_end]. These form [blank_start]major[blank_end] part of debt financing. There are two types & they are [blank_start]line of credit[blank_end] ([blank_start]agreement[blank_end] between bank & firm to [blank_start]borrow[blank_end] up to certain point) & [blank_start]loan commitment[blank_end] ([blank_start]arrangement[blank_end] that requires bank to lend up to [blank_start]maximum[blank_end] prespecified loan amount at prespecified interest rate)
1. Abank loans
2. Bmajor
3. Cline of credit
4. Dagreement
5. Eborrow
6. Floan commitment
7. Garrangement
8. Hmaximum
40Two types of loan commitment include: [blank_start]revolving[blank_end] (loan commitment in which [blank_start]funds[blank_end] flow back & forth between [blank_start]bank[blank_end] & [blank_start]firm[blank_end] without any predetermined schedule up to [blank_start]maximum[blank_end] amount that loan commitment is [blank_start]agreed[blank_end] upon) & [blank_start]non-revolving[blank_end] (loan commitment where [blank_start]firm[blank_end] cannot pay down [blank_start]loan[blank_end] & then subsequently [blank_start]increase[blank_end] amount of borrowing)
1. Arevolving
2. Bfunds
3. Cbank
4. Dfirm
5. Emaximum
6. Fagreed
7. Gnon-revolving
8. Hfirm
9. Iloan
10. Jincrease
41Another way of issuing long-term debt is [blank_start]public issue[blank_end] of [blank_start]bonds[blank_end]
1. Apublic issue
2. Bbonds
42Two forms of direct private long-term financing include: [blank_start]term loans[blank_end] (direct business [blank_start]loans[blank_end] which have maturities between [blank_start]one[blank_end] to [blank_start]five[blank_end] years) & [blank_start]private placement[blank_end] ([blank_start]loans[blank_end] provided directly by limited number of [blank_start]investors[blank_end] which are similar to [blank_start]term[blank_end] loans but maturity is [blank_start]longer[blank_end])
1. Aterm loans
2. Bloans
3. Cone
4. Dfive
5. Eprivate placement
6. Floans
7. Ginvestors
8. Hterm
9. Ilonger

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Description: User has deleted their subject information Quiz on Lecture 6- Raising capital, created by Deleted user on 12/07/2021.
Author: Deleted user
Language: English
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History: Created on 12 Jul 2021 · updated on 12 Jul 2021
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Lecture 6- Raising capital

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