Chapter 10: Stock Offerings and Investors

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11 Terms

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Private Equity (2)

  1. A privately held business with owners that can’t sell their share to the public.

  2. Some want to go public to obtain financing and so they can cash out by selling their original equity investment.

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Private Equity - Venture Capital (VC) Funds (5)

  1. Receive money from wealthy investors and pension funds.

  2. Investors aren’t allowed to withdraw money before a certain deadline.

  3. Have conferences that bring private business and VC funds together.

  4. Usually exit in 4-7 years by selling the equity stake.

  5. Performance vaires, with big hits and a lot of duds.

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Private Equity - Private Equity Funds

  1. Pool money provided by investors and invest in businesses.

  2. Rely heavily on debt.

  3. Look for companies that are undervalues and mismanaged.

  4. Will sell equity after several year.

  5. Performance varies, with wise investments coming at low stock prices.

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Initial Public Offering

When a privately-held company offers shares of its stock to the public for the first time, making it a publicly traded company.

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Direct Listing

When a private company starts to trade on an echange without raising additional money.

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Special Purpose Acquisition Company (SPAC)

Also known as blank check companies, they go public as just a shell company that raises money to fund future acquisition/merger with a private company.

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Public Equity (3)

  1. Common stock ownership entitles shareholder to numerous rights.

  2. Investors assign vote to management through the use of a proxy.

  3. Shareholders monitor the firm by changes in the stock price.

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What do shareholders do when they are disappointed with managments management? (3)

  1. Do nothing.

  2. Sell the stock.

  3. Engage in Shareholder Activism.

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Antitakeover Amendments

An amendment may require that at least two-thirds of the shareholder votes approve a takeover.

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Posion Pills

Special rights awarded to shareholders or specific managers on the occurrence of specified “events.”

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Golden Parachutes

Specifies compensation to managers in the event that they lose their jobs due to takeover.