8979357
Description
Flashcards by Safiya Caesar, updated more than 1 year ago
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Created by Safiya Caesar
over 7 years ago
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| Question | Answer |
| What are the different types of financing available to a private company? | Friends and family, Bank loans, Angel investors, Venture Capital Funds |
| What are the 5 ways to raise funds in the capital market? | Private placement IPO Seasoned equity offering The valuation of rights issues Asset securitisation |
| What is private placement? | the sale of stocks, bonds or securities to a private investor. 2 types: Angel investors and Venture Capitalists |
| What is an Angel Investor? | Someone that provides the first round of external financing to start up companies |
| What do angel investors receive in return for their investment? | Shares and perhaps a seat on the board of directors |
| What is venture capital? | A pool of institutional investors investing money to provide funds for companies |
| What is a VC and what do they do? | Venture Capitalists are managers of the fund. They sit on the boards of the companies they fund and do this by lending the funds to companies and receiving interest before distributing it to the other investors |
| What does it mean to go public? | selling some of a company's shares to outside investors in an IPO then letting the share trade in public markets |
| Public offering | securities are offered to the public and must be registered with the SEC (USA) or the FSA (UK) |
| Give a few advantages of going public | - Diversification of stockholders - Increased liquidity - Increases customer recognition/exposure - Makes it more feasible to use stock as employee incentives. |
| Give a few disadvantages of going public | - Must file numerous reports - Operating data must be disclosed which is available to competitors - Managing investor relations is time consuming - Special deals to insiders more difficult |
| What are seasoned equity offerings? | Aka secondary/follow up offerings. Company issues additional shares Offer price based on existing price |
| What is a rights issue? | Giving existing shareholders the right to buy new shares first or sell the right to buy. --> Maintains their wealth Given in proportion to their existing holdings |
| Theoretical ex-right price formula | |
| How do you calculate the right Value per new share after a rights issue? | Theoretical ex-right price - new price |
| What happens to shareholders that do not take up their right? | They are in danger as their holdings are diluted |
| How does a public company go private? | Managers and outside investors team up to purchase all publicly held shares. This is called a Leveraged Buyout (LBO) |
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