Test for Chapter 22

The first public equity issue offered by a company is commonly referred to as a

• initial public offering

• registered issue

• seasoned new issue

• secondary offering

• initial private ofering

The Green Shoe provision is used to

• address unsold shares

• reduce the number of shareholders

• provide additional reward to investment bankers for a risky issue

• provide funding to investment bankers for unsold shares

• cover oversubscriptions

One argument against the use of shelf-registration is

• that it unfairly increases the market price of the registered security

• that it provides an unfair advantage to debt issues

• that it is limited to only technology and manufacturing firms which provides those industries with a market advantage

• the ability to use the dribble method in conjunction with the shelf-registration

• the age of the information disclosure

If existing shareholders are offered rights to a new issue of securities, those shareholders

• will receive additional shares at no additional cost to themselves

• should expect to receive the book value per share for each right they have been granted

• must participate in the offering if they wish to maintain their current ownership position

• will pay the book price per share for each share obtained through the rights process

• will need to pay the current market price per share on the day they tend their rights

Assuming everything else is constant, when a stock goes ex-rights the stock price should

• remain constant as shareholder value is unaffected by a rights offering

• increase since the corporation no longer has the right to force the stockholder to convert

• remain the same since an efficient market would anticipate this change

• decrease since the stockholder is losing an option

• decrease by the amount of the tax applicable to the right

In a typical deal, the venture capitalist will receive at least ____ percent of the equity of the financed firm

• 40

• 50

• 20

• 5

• 75

If a rights offer is used as the means of funding a positive net present value project, then shareholders should expect the price of their shares to

• decrease due to the additional shares being offered

• change but the direction of that change cannot be predicted

• increase due to the increased value of the issuing firm

• remain constant as the value of the project will be offset by the issuance of the new shares

• change in direct relation to the change in the book value per share

Venture capitalists will frequently

• hold nonvoting preferred stock

• hold voting common stock which grants them priorities over the debt holders

• hold voting preferred stock which grants them priorities in the event of a sale or liquidation

• hold nonvoting common stock

• obtain seats on the board but not obtain shares of stock

A registration statement is effective on the 20^th day after ling unless

• a syndicate can be formed sooner

• the SEC is backlogged with statements

• the issue exceeds $50 million in which case the wait period is 30 days

• a letter of comment suggesting changes is issued by the SEC

• a tombstone ad is issued indicating its demise

Tokens offered in initial coin offerings

• can be exchanged for services but not for cash

• can only be obtained from Ethereum

• may be obtained in the hope that the tokens will appreciate in value

• are considered to be illiquid investments

• must be exchanged for shares of common stock once the coin's issuer has gone public