Traditional Underwriting Best efforts offering -a security offering in which bankers do not commit to purchase any unsold a p the investment bankers agree to use only their best efforts to sell the issuer securities The investme securities Shelf registration - a procedure whereby a company is permitted to register securities it plans to sell over the next two years; also called sEC Rule 415. These securities can then be sold piecemeal whenever the company chooses 19-11
19-11 Traditional Underwriting Best efforts offering -- A security offering in which the investment bankers agree to use only their best efforts to sell the issuer securities. The investment bankers do not commit to purchase any unsold securities. Shelf registration -- A procedure whereby a company is permitted to register securities it plans to sell over the next two years; also called SEC Rule 415. These securities can then be sold piecemeal whenever the company chooses
Shelf Registration: Flotation Costs and Other Advantages A firm with securities sitting on the shelf can require that investment banking firms competitively bid for its underwriting business. This competition reduces underwriting spreads The total fixed costs ( legal and administrative)of successive public debt issues are lower with a single shelf registration than with a series of traditional registrations The amount of free advice available from underwriters is less than before shelf registration was an alternative to firms 19-12
19-12 Shelf Registration: Flotation Costs and Other Advantages This competition reduces underwriting spreads. The total fixed costs (legal and administrative) of successive public debt issues are lower with a single shelf registration than with a series of traditional registrations. The amount of free advice available from underwriters is less than before shelf registration was an alternative to firms. A firm with securities sitting on the shelf can require that investment banking firms competitively bid for its underwriting business
Privileged Subscription Privileged subscription - The sale of new securities in which existing shareholders are given a preference in purchasing these securities up to the proportion of common shares that they already own; also known as a rights offering Preemptive right - The privilege of shareholders to maintain their proportional company ownership by purchasing a proportionate share of any new issue of common stock or securities convertible into common stock 19-13
19-13 Privileged Subscription Privileged subscription -- The sale of new securities in which existing shareholders are given a preference in purchasing these securities up to the proportion of common shares that they already own; also known as a rights offering. Preemptive right -- The privilege of shareholders to maintain their proportional company ownership by purchasing a proportionate share of any new issue of common stock, or securities convertible into common stock
Terms of offering Right-A short-term option to buy a certain number(or fraction of securities from the issuing corporation; also called a subscription right. Terms specify: the number of rights required to subscribe for an additional share of stock the subscription price per share the expiration date of the offering 19-14
19-14 Terms of Offering Terms specify: the number of rights required to subscribe for an additional share of stock the subscription price per share the expiration date of the offering Right -- A short-term option to buy a certain number (or fraction) of securities from the issuing corporation; also called a subscription right