Raising Capital Lecture Review

Vocabulary flashcards covering key terms related to raising capital and initial public offerings.

Angel Investors

Individuals who invest their own money, focusing on smaller, early-stage deals.

Venture Capital

Financing for new, high-risk ventures, provided by firms pooling funds from various sources.

Initial Public Offering (IPO)

A company’s first equity issue made available to the general public.

Underpricing

The phenomenon where IPO shares are priced below their market value, causing immediate gains for investors.

Seasoned Equity Offering (SEO)

A new equity issue of securities by a company that is already publicly traded.

Dilution

Loss in existing shareholders’ value when a firm sells new shares to the public.

Rights Offering

An issue of common stock offered to existing shareholders at a specified price to avoid dilution.

Underwriter

Investment firms that act as intermediaries between a company and the public, helping to sell securities.

Firm Commitment Underwriting

Underwriter buys the entire issue and assumes full responsibility for any unsold shares.

Best Efforts Underwriting

Underwriter sells as much of the issue as possible but can return any unsold shares to the issuer.

Dutch Auction Underwriting

Offer price is set based on competitive bidding by investors.

Green Shoe Provision

Contract provision allowing underwriters to purchase additional shares from the issuer at the offering price.

Quiet Period

A time during which companies must limit communications with the public after planning an IPO.

JOBS Act

Legislation allowing companies to raise money through crowdfunding by issuing securities.

Flotation Costs

Costs associated with floating a new issue of securities.