Business Model Essay

1142 Words Dec 28th, 2012 5 Pages
Chapter 19 Issuing Securities to the Public
1.

The Public Issue:The basic procedure for a new issueI. Obtain approval from the board of directors.II. The firm must prepare and file a registration statement with the SEC.
Registration statement
: A carefully prepared set of documents, including aprospectus, which is filed with theSECprior to aninitial public offering.III. The SEC studies the registration statement during a waiting period
. Duringthis time, the firm may distribute copies of a preliminary prospectus.A registration statement will become effective on the 20 th day after its filing unlessthe SEC sends a letter of comment suggesting changes. After the changes are made,the 20-day waiting period anew.
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For seasoned offerings the price is set close to the prevailing marketprice
. For IPOs intensive research and analysis are required.VI. Tombstone advertisements are used during and after the waiting period.31

Study notes By Zhipeng Yan tombstone Anadvertisementin a business newspaper or magazine, placed by aninvestmentbank , announcing anofferingand listing thesyndicatemembers.VII. Public offering and sale
: shortly after the last day of the registration period.In a typical firm commitment contract
, the underwriter buys a stipulatedamount of stock from the firm and sells it at a higher price. The selling groupassists in the sale.VIII. Market stabilization: usually 30 days after the offering. The underwriterstands ready to place orders to buy at a specified price on the market.2. Alternative Issue Methods:Two kinds of public issues: the general cash offer and the rights offer
.
Cashoffers are sold to all interested investors
, and right offers are sold to existingshareholders.
Equity is sold by both the cash offer and the rights offer, though almost all debt is sold by cash offer
.
All IPOs are cash offers. 3. Cash Offer:
I.

Firm commitment offering
An arrangement in which an underwriter assumes the risk of bringing a newsecurities issue to market, by buying the issue from the issuer and guaranteeing saleof a certain number of shares to

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