Mergers and acquisitions, underwriting, and corporate finance concepts tested on the Series 79 limited representative investment banking exam.
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- What is a firm commitment underwriting?
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The underwriter purchases the entire security offering from the issuer and assumes the risk of selling it to investors.- What is a best efforts underwriting?
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The underwriter agrees to sell as many securities as possible but does not guarantee to purchase any unsold shares.- Define an all-or-none (AON) offering.
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An offering in which the underwriter must sell the entire amount or the deal is canceled and proceeds are returned to investors.- What is the underwriting syndicate?
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A group of underwriters who jointly agree to purchase and distribute a new security offering.- What is the managing underwriter's role?
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The lead underwriter who organizes and coordinates the entire underwriting syndicate for the offering.- What is an underwriting spread?
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The difference between the price the underwriter pays the issuer and the public offering price charged to investors.- Define a green shoe option.
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An option allowing underwriters to purchase additional shares (usually up to 15% of the original offering) to cover over-allotments.- What is a bought deal?
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An underwriting arrangement where the underwriter commits to purchase the entire issue from the issuer at a specific price with no shopping period.- What is a lock-up agreement?
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A contract preventing insiders and large shareholders from selling shares for a specified period (usually 180 days) after an IPO.- What is a red herring prospectus?
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A preliminary prospectus filed with the SEC that contains all offering details except the final price and number of shares.- What is a final prospectus?
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The official document distributed to investors that includes all terms, including the final offering price and number of shares.- Define the quiet period in securities offerings.
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The SEC-mandated period during which the issuer and underwriters are restricted from making statements that could influence investor demand.- What is a roadshow?
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A series of presentations by company executives and underwriters to institutional investors to promote an upcoming securities offering.- What is stabilization in the context of underwriting?
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Actions taken by underwriters to maintain or support the price of a newly issued security in the aftermarket, usually by purchasing shares.- Define a secondary offering.
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An offering of securities by existing shareholders of a public company, not by the company itself, adding to the total shares outstanding.
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