Investment Banking: IPO Process and Services

What is the minimum amount required for SEC registration?

$1.5 M

What is the primary goal of an underwriter in an IPO?

To ensure all shares in the offering are spoken for

What is the purpose of a tombstone in the financial press?

To disclose the terms of the IPO to the public

What is the result of an underwriting syndicate being unable to generate interest in the available shares?

Undersubscribed Signup and view all the answers

What is the primary difference between a firm commitment and best efforts?

The underwriter's level of commitment Signup and view all the answers

What is the purpose of an underwriter's advice on current market conditions?

To determine the type of security to offer Signup and view all the answers

What is the primary purpose of a short sale?

To sell a security you don't own with the intent of buying it back at a later date Signup and view all the answers

What is the main difference between a full-service broker and a discount broker?

The level of research and investment advice they provide Signup and view all the answers

What is the role of a dealer in the securities market?

To hold inventories of securities on their own account Signup and view all the answers

What is the main purpose of the Securities and Exchange Commission (SEC)?

To keep an eye on the market to make sure everyone follows the rules Signup and view all the answers

What is the primary role of an investment banker in a merger and acquisition?

To act as a matchmaker between the acquiring and target firms Signup and view all the answers

What type of financial statements are prepared for prospective buyers in a merger and acquisition?

Confidential financial statements Signup and view all the answers

What is the main distinction between a market order and a limit order?

The price at which the security is traded Signup and view all the answers

In which market do investment banks play a primary role?

Primary market Signup and view all the answers

What is the significance of the 1933 and 1934 acts in the securities market?

They established registration requirements for new securities and reporting requirements for companies and insiders Signup and view all the answers

What is the term for a situation where a target firm does not want to be acquired?

Hostile takeover Signup and view all the answers

What is the purpose of a letter of intent in a merger and acquisition?

To express a commitment to pursue the acquisition Signup and view all the answers

What is the role of investment bankers in facilitating mergers and acquisitions?

To handle all aspects of the deal, including financing, legal issues, and deal specifics Signup and view all the answers

What is the primary purpose of the laws mentioned in the text?

To keep the stock market honest and safe for everyone involved Signup and view all the answers

What was the effect of the 1978 legislation on private equity firms?

It permitted them to receive investments from pension funds Signup and view all the answers

What is the primary difference between venture capital and private equity?

Venture capital provides funds for startups, while private equity provides funds for established companies Signup and view all the answers

What is the role of venture capital firms in the companies they invest in?

They often become involved with firm management and provide expertise Signup and view all the answers

What is the result of the removal of barriers between commercial and investment banks?

Commercial banks are slowly gaining regulatory permission to engage in the full range of services offered by investment banks Signup and view all the answers

What is the primary reason for venture capitalists to invest in different firms?

To achieve diversification and reduce risk for investors Signup and view all the answers

What is the purpose of registration and regular information sharing for companies that sell stocks to the public?

To ensure that companies are transparent about their financial situation and provide regular updates Signup and view all the answers

What is the typical outcome of a venture capital investment?

Initial public offerings (IPOs) Signup and view all the answers

What is the purpose of staged funding in venture capital investments?

To reduce the risk for investors by disbursing funds in stages Signup and view all the answers

What was the average return on venture capital investments in the 1990s?

30% Signup and view all the answers

What is the primary objective of venture capitalists when investing in startups?

To generate a return for investors through long-term investments Signup and view all the answers

What is the typical duration of venture capital investments?

Long-term, often taking several years to see profit Signup and view all the answers