Series 79

S-1

Long form registration statement - used for IPO

S-3

Short form registration statement that can be used by an issuer that has been

1) public for at least one year

2) has a public float of at least 75 million

-used for follow-on offering

S-4

Used for securities issued in connection with business combination transactions ( M&A)

includes:

1) a brief summary of the term of the acquisition,

2) the reasons the issuer and target are engaging in the transactions,

3) a description of any new securities being issued,

4) any material differences between the rights of target shareholders (pre-deal) versus their rights in any new securities being offered (post-deal), and

5) a statement regarding the accounting and tax treatment of the transaction.

form 424(b)

final prospectus

Seasoned Issuer

75m up to 700 in public float

at least 1 year of SEC filings

Unseasoned Issuer

less than $75mm in public float

OR

SEC filer for less than 1 year

non-reporting issuer

Private company - no SEC filings

Ineligible Issuer

an issuer

1) not current w/ sec fillings

2) filed for bankruptcy w/ last 3 years

3) Blank check company (e.g. SPAC)

Form 3

Filed when a person becomes a corporate insider

filed within 10 days of becoming an insider

Form 4

Filed anytime a corporate insider trades the stock in the open market

filed w/in 2 days post-trade

Form 5

Corp insider reports transactions in sec's not in public market

filed w/in 45 calendar days of fiscal year end

13D

acquire more than 5% - active investors

5 business days after acquisition

An amended 13D if required must be filed within 2 business days

13G

acquire more than 5% - passive investors

45 days after calendar quarter end

13E

Taking public company private

13F

Quarterly filing by institutional investment managers- disclose long position ($100mm+ in assets)

45 calendar days after quarter end

Form 13F filings must include the issuer name of all listed securities, a description of the class of listed securities, the number of shares owned, and the fair market value of all listed securities.

Regulation FD

aims to promote the full and fair disclosure of material information to all investors at the same time

proxy statement

Schedule - 14A -A booklet of information sent to stockholders before annual votes on directors, executive pay, and other matters.

The preliminary proxy (PRE14A) must be filed with the SEC at least 10 calendar days prior to filing a definitive proxy with the SEC (DEF14A).

The definitive proxy must be filed with the SEC and sent to shareholders at least 20 calendar days prior to the shareholder meeting.

Primary Offering

Proceeds go to the company

secondary offering

Proceeds go to affiliates who sold

Split offering

combination of primary and secondary offering

Stand-by commitment

Underwriter agrees to purchase any percentage of a rights offering that's not subscribed during a 2-4 week standby period in order to resell

tie-in arrangement

When an underwriter sells shares of a new issue to a client contingent on the client purchasing additional shares in the secondary market from the underwriter.

spinning

When an underwriter sells shares of a new issue to company executives that the underwriter hopes to do investment banking business within the next 3 months or has done investment banking business within past 12 months.

An exemption is available if the issuer (not the underwriter) directs sales, in writing, without influence from the underwriter.

Quid Pro Quo Allocations

Prohibited allocations of a new issue to a customer that agrees to pay excessive compensation for other services of the underwriter. A customer cannot "pay" for an allocation through the purchase of other services.

corporate finance department (CFD)

Examines the fairness of compensation to underwriters, including spread and additional expenses

The maximum spread is 7%

FINRA Rule 5130 - IPO Allocation (Restricted)

Finra member firms and employees

Finders and fiduciaries of the managing underwriter

Portfolio manager for their personal accounts

Immediate family members of restricted persons ( Permitted if they do not live together)

FINRA Rule 5130 - IPO Allocation (Premitted)

Employees of the issuer and their family members

Issuer-directed sales are not designed to circumvent the rule

Accounts (e.g. joint accounts or funds) that have 10% or less restricted person ownership

Syndicate Covering Transaction

When the underwriter oversells the allotment and then purchases securities in the open market to make delivery on the new issue, oversold

Must notify FINRA in advance and within 1 day of completion

There are no specific pricing requirements or restrictions for syndicates covering transactions.

Regulation A

mini IPO, requires 1A filling, offering Circular (mini-prospectus)

up to 5 mill, blue sky laws, no FIN statements

Exempt Transactions - Regulation A+ tier 1

mini IPO, requires 1A filling, offering Circular (mini-prospectus)

up to 20 mill, blue sky laws, no FIN statements

Exempt Transactions - Regulation A+ tier 2

mini IPO, requires 1A filling, offering Circular (mini-prospectus)

raise up to 75mill, no blue sky laws, semi-annual FIN statements

Exempt transactions - Reg D rule 506(b)

506 B - unlimited deal size. unlimited # of accredited and up to 35 unaccredited (no advertising)

Exempt transactions - Reg D Rule 506(c)

506C - unlimited deal size. unlimited # of accredited and no unaccredited (can advertise)

Reg D Rule 504

allows for private placement that can raise up to $10 million within 12 consecutive months. No limit on accredited and non-accredited investors. Can advertise

Dividend Yield

Dividend per share/ Share price

Total Annual Dividends/ Equity Value

Dividend payout Ratio

annual dividend (per-share) / Basic Eps

Total annual dividends/ Net income

PE mutiple * EPS

implied share price

PE Ratio

Price/ EPS

Equity value/ Net income

PEG Ratio

Compares the relationship between a firm's P/E ratio and its expected EPS or net income growth rate

Price-Earnings Ratio/Earnings Growth Rate

Price to Book Ratio

market cap/book value of equity

Price to Tangible Book ratio

Market cap / Tangible book value

Tangible Book Value

(Assets - Goodwill) - Liabilities

Book Value

Assets - Liabilities

Exempt Transactions - Rule 144

SEC rule allows public resale of restricted and controlled securities if conditions are met

holding period: (restricted only) 6 months or 1 year for non reporting company

volume limits: 1% of outstanding or the Average 4-week trading volume

If control stock is sold in the open market through Rule 144, the insider also files a Form 4 within two business days of the sale.

Exempt Transactions - Rule 144A

SEC rule allows public resale of restricted and controlled securities to QIBs

Broker-dealers qualify as QIBs if they manage more than $10 million. Having discretion is required to qualify as a QIB.

Piggyback Registration Rights: The issuer allows an investor to register in registered shares on the issuer's registration statement at the issuer's expense.

Exempt Transactions - Rule 147A

intrastate rule 147, but issuers are not required to be incorporated in the state. The principal place of business is required

Exempt Transactions - Rule 147

intrastate offering

Are incorporated or have had their principal place of business (for a

partnership) in the state where the securities are to be offered

Carry out a significant amount of their business in that state, and

Offer and sell their securities only to residents of that state

Quick Ratio

(Current Assets - Inventory) / Current Liabilities

Treasury Stock Method

Mgmt Options × (1 − Share Price/Strike Price​)

Accelerate Expenses ( Report lower revenue & Profit)

For Accounting expenses: DTL

For Tax Purposes: DTA

Accelerate Revenue ( Report Higher Revenue)

For Accounting expenses: DTA

For Tax Purposes: DTL

Fixed Charge Coverage Ratio

(EBIT + Fixed Charges) / (Interest Expense + Fixed Charges)

debt to capitalization

Compares a firm's total debt to its overall capitalization on its balance sheet.

= Total Debt / (Total Debt + Book Equity)

Debt to Tangible Net Worth

Total debt /(shareholders equity - intangible assets)

levered beta

unlevered beta (1+[(1-tax rate)(debt/equity)])

Unlevered Beta

levered beta/(1+[(1-tax rate)*(debt/equity)])

Market Risk Premium

s%p 500 expected return - risk free rate

Perpetuity Growth Method

FCF x (1+g) / (r-g)

UFCF formula

EBIT * (1-Tax) + D&A - Capex - NWC

Return on Invested Capital (ROIC)

EBIT/total invested capital (debt + equity)

or

EBIAT/total invested capital (debt + equity)

Return on Equity (ROE)

Net Income / Average Stockholders' Equity

Return on Assets (ROA)

net income/average total assets

Economic Value Added (EVA)

EBIAT - (Investment Amount * Discount Rate)

Equity Value Formula

Share Price * Shares Outstanding

Net Income * P/E Multiple

Accretion/Dilution Steps

1. Calculate AcquirerCo shares outstanding

2. Calculate AcquirerCo's standalone EPS

3. Calculate pro forma net income

4. Calculate the new shares issued in the transaction

5. Calculate pro forma shares outstanding

6. Calculate pro forma combined EPS

7. Compare AcquirerCo's standalone EPS to pro forma combined EPS

Due diligence - Second Round

Business Issues

-Earnings

-Key facilities & personnel

Legal Issues

-Contracts with vendors and clients

Finance/Accounting

-Audit Letters

-Internal controls

Regulatory Issues

-Jurisdiction

-Antitrust concerns

Hart-Scott-Rodino Antitrust Improvement Act of 1976 (HSR)

Requires merger filings to DOJ & FTC for antitrust review

30-day waiting period (no gun-jumping)

Only applies to deals over ~$50M (adjusted for inflation)

Rule 10b-18 - Issuer Share Repurchase Safe Harbor

Timing:

Only during normal hours (9:30 am - 4:00 pm)

Excludes first trade of the day

Excludes last 30 minutes (or 10 mins for actively traded securities)

Volume Limit:

Max 25% of ADTV per day

Exception: 1 block trade per week (no other buybacks that day)

Pricing Rule:

Cannot exceed the greater of:

Highest independent bid, or

Last independent transaction price

One Broker Rule:

Must use one market maker per day for bids/purchases

Under Rule 14d-9 - tender offer

The board is limited to the following responses:

Recommend acceptance or rejection of the tender offer.

express no opinion and remain neutral;

State that the company cannot take a position regarding the tender offer.

Additionally, the board must provide reasons for its response and cannot advise shareholders to purchase additional shares in the open market, as such advice could lead to manipulation of the tender process.

Under Rule 14e-5 ( tender offer)

the purchaser is prohibited from acquiring shares of the target company outside the tender offer during the tender period and for at least 10 days after the offer terminates.

Agreement Among Underwriters

The AAU requires shares trading at a premium that are returned by a purchaser to a syndicate member after trading begins (this is unusual) to be:

1. First, used to offset any syndicate short positions, then

2. Offered at the public offering price to unfilled customer orders using a random allocation methodology, and

3. Finally, sold on the secondary market with the profits anonymously donated to charity (to avoid any reputational benefit to the member)

Note: The shares cannot be placed into the firm's investment account—this would violate FINRA rules on new-issue allocations and distributions.

EGC ( ememrging growth company)

1.235bn or less in sales annually

allows banking and research to work on a bake-off, pitch.

CANNOT go on roadshows together.

A company will retain EGC status until the

earliest of:

◆ The first fiscal year after its revenues reach, or exceed, $1 billion

◆ The first fiscal year following the fifth anniversary of its IPO

◆ The date on which the company has, during the previous three years,

issued more than $1 billion in non-convertible debt, or

◆ The date on which the company becomes a "large accelerated filer"

(discussed in Chapter 8)

Gross Spread of underwriting fee

manager's fee = U/W fee + Selling concession

Final Syndicate Settlement

Must occur within 90 days following the syndicate settlement date, which is the date the issuer delivers the securities to the syndicate members. Additionally, a prospectus would not be a part of syndicate settlement.

QIU ( Qualified Independent Underwriter)

A QIU is defined as a member firm that does not have a conflict of interest in the offering, agrees to be an underwriter and has previously served as an underwriter in at least three public offerings of similar size during the preceding three-year period.

QIU - If there is a conflict of interest in an

Underwriting, you must hire a qiu

What does it mean to have a conflict of interest in an

U/Q

1. If the Issuer is a BD

2. The issuer intends to become a BD

3. The issuer is 10% or more owned by a BD or its

employees

4. If the issuer is using more than 5% of the proceeds in

The offering to pay down debt extended by a BD on

the deal

A QIU is not required if:

1. The conflicted firm on the deal is not the manager

2. The securities are already publicly traded

WKSI (well-known seasoned issuer)

Public float of 700 or more

Has issued, over the past three years, at least $1 billion of non-convertible securities (other than common equity) in primary offerings for cash

permitted to use free writing prospectuses during the pre-registration period

Asset-backed securities issuers, registered investment companies, and business

Development companies are excluded from the definition of WKSIs.

Eligibility for WKSI status is determined at the time of an issuer's most recent annual report (10-K).

Full takedown fee

selling concession + underwriting fee

all or none

a type of best efforts underwriting. If the underwriter is not able to sell all the shares within a certain period, the entire deal will be cancelled.

best efforts

is an underwriting agreement in which the underwriters attempt to sell all the securities but have no obligation to buy any unsold shares. These agreements are usually used for higher-risk securities.

minimum-maximum (mini-max)

This type of best effort will be cancelled

unless a minimum amount is raised. Once the minimum threshold has been reached, it becomes traditional best efforts underwriting. A mini-max is also called a part-or-none.

Firm Commitment

The managing underwriter agrees to purchase all shares that are to be offered. If part of the new issue goes unsold, any unsold shares are distributed among the

members of the syndicate.

regulation S-K

contains instructions for filing forms under the '33 Act and

also under the Securities Exchange Act of 1934 (the '34 Act). The regulation provides guidance on the use of projections and ratings included in registration

statements.

Bond trade confirmation

A trade confirmation for a bond must include yield-to-worst, which is the lower of yield-to-call or yield-to-maturity.

carry trade

A carry trade is when an investor borrows money in a currency with a low interest rate and uses it to invest in a currency with high rates. If GBP rates are 0.5% and US rates are 4.0%, the investor could borrow GBP, convert it to USD, and invest it to earn a return of 3.5% (the difference between the rates).

Filing the preliminary prospectus

Five copies of each version of the preliminary prospectus must be filed with the SEC no later than when each copy is first distributed to potential investors. The preliminary prospectus must be delivered to investors at least 48 hours prior to confirming sales of securities.

Free writing prospectus (FWP)

FWPs may be used in both debt and equity offerings. Examples of FWPs include term sheets, glossy product pamphlets, marketing emails, and websites describing the product. Another example of an FWP is a CEO who gives an interview to a local paper about his company's upcoming IPO

FWPs are prepared and filed with the SEC by the issuer, attorneys, and accountants. An FWP would never be prepared or filed by the underwriter.

Promissory note

A promissory note is a short- to medium-term loan. Depending on the method of sale, it may be considered a security and therefore require registration for lawful public sale.

Example: If a promissory note has more than 270 days to maturity and is being sold in a manner similar to how bonds are sold, such as to securities investors or in a block trade, then it would likely be considered a security. If, on the other hand, it has less than 270 days to maturity and is not purchased in a security-like transaction, then it would likely not be considered a security.

Chapter 7 Bankruptcy

Bankruptcies filed under Chapter 7 result in the liquidation of the insolvent firm, with its assets distributed to creditors.

In addition to filing a bankruptcy petition with the court, companies must file schedules of assets, liabilities, current income, and expenses.

Chapter 11 Bankruptcy

A Chapter 11 filing allows a company to continue operating while restructuring its financial obligations.

In addition to the schedules required under Chapter 7, Chapter 11 filings require 1) a plan of reorganization and 2) a disclosure document that contains enough details to enable creditors to make informed judgments when voting to accept or reject the plan.

Private Placement Memorandum

A disclosure document used in private placements, provided to potential investors. It includes deal terms, issuer details, management info, financials, risks, use of proceeds, and subscription agreements, allowing unlimited accredited investors to participate.

Porspectus

a legal document that companies must file with the SEC when offering securities to the public (like in an IPO).

It provides key details about the company, financials, risks, use of proceeds, and terms of the offering, helping investors make informed decisions.

Special purpose acquisition companies (SPACs)

a blank- check comapny that raises money through an IPO without having a bussiness, with the sole purpose of aquiring a private company later.

SPAC) typically does include forward-looking projections of the target company it plans to merge with in its offering documents.

(SPAC) typically must complete an acquisition within 18 - 24 months and invest at least 80 percent of its net assets for any such acquisition. If it fails to do so, then it must dissolve and return capital to investors.

Merger proxies (M14A)

Proxy statement sent to shareholders before a merger or Acquisition vote, it is also defined as a prospectus by the SEC.

A merger proxy will include the terms of the merger, such as the price and form of consideration (e.g., cash v. stock) and whether the management team will receive additional compensation as a result of the change in control.

A fairness opinion summary can be found in a merger proxy. The specific fairness opinion members and the regulatory history of the opinion's author(s) is not required in the summary.

Qualified versus unqualified opinion (audits)

When financials are audited, the auditor may render an unqualified opinion (good) or a qualified opinion (bad). An unqualified opinion states the financials fairly reflect the client's financial results and position. The qualified opinion (bad) indicates the audit may have been limited or certain information could not be verified.

Public Float calculations

outstanding shares - shares owned by insiders.

After an offering, the company may still have unregistered shares held by the founder, the CEO, or other early investors. These outstanding shares are not part of the public float.

Flipping

Flipping means immediately selling IPO shares allocated through the syndicate, usually on the 1st day of trading. While it is not market manipulation, a syndicate will typically impose penalty bids to discourage flipping.

Greenshoe clause

An overallotment option (also called a greenshoe) gives underwriters the right to offer more shares than the amount specified in the underwriting agreement. must be done within the first 30 days of trading

A greenshoe allows up to 15% more shares to be issued, at the underwriters' discretion and at the public offering price.

All greenshoe shares must be sold at the

public offering price.

No Finra notification needed

Nasdaq listing requirements

For a company to remain listed on Nasdaq, it must maintain a $1.00 bid price, 400 total shareholders, at least two market makers, and a minimum monthly trading volume.

Reg M ADTV

ADTV means the worldwide average daily trading volume which looks back over the past 2 months.

Stabilization

Stabilization allows the underwriter to bid on a new issue in the secondary market to prevent a decline in price. The firm that stabilizes on the syndicate's behalf is the stabilization agent. This is usually the syndicate manager. The stabilization bid can last indefinitely, as no rule limits the duration of a stabilizing bid.

The stabilizing bid may be entered at the greater of the highest bid or last sale price, but never above the public offer price.

A stabilizing bid may be maintained after the principal market (e.g., NYSE) for the security is closed (i.e., in after-market trading).

The issuer will never stabilize, it will always be an underwriter.