SIE 11 - Offerings

  1. What is a PIPE?
    • A private investment in public equity which is the private raising of capital by a company that's publicly traded
    • For example, BofA sold reg d stock to Warren Buffet during the financial crisis.
  2. What are the four parts of the primary market?
    • Issuer
    • Underwriting manager (investment banker)
    • Syndicate members
    • Selling group
  3. What does the issuer do?
    They need capital and they hire an underwriter
  4. What does the underwriting manager do?
    • They facilitate distribution and they assume varying degrees of liability (depending on the offering type)
    • They sign an underwriting agreement with the issuer
  5. What do syndicate members do?
    These are broker/dealers that assist in selling the shares. They share liability with the underwriting manager.
  6. What does a selling group do?
    They are broker/dealers that accept no liability and only assist in sales. They sign a selling agreement with the manager and they accept no capital risk. They generally market to retail investors.
  7. What are the two types of agreements that a syndicate member can enter into during an IPO?
    Firm commitment (capital risk) vs. best efforts (no capital risk)
  8. What are the stages of an IPO required by the Securities Act of 1933?
    • Pre-registration
    • Cooling-off
    • Post-registration
  9. What is the pre-registration period?
    • Securities Act of 1933
    • Document preparation and due diligence begins.
    • The registration statement is completed
    • B/Ds and RRs may NOT communicate with the public
  10. What is the cooling-off period?
    • The issuer files the registration with the SEC
    • The issuer distributes the preliminary prospectus (red herring)
    • They "blue sky" the issue - i.e. they file in states that require registration
    • They hold a final due diligence meeting
  11. What is the post-registration period?
    • The effective date has occurred
    • Sales are confirmed and the final prospectus is delivered
    • This prospectus must contain the SEC no-approval clause (saying that the SEC has registered, not approved).
  12. What are the types of prospectuses?
    • Statutory
    • Preliminary
    • Summary
    • Free Writing
  13. What is a statutory prospectus?
    A condensed form of the registration statement that provides detailed information on the offering (includes the preliminary and final prospectuses)
  14. What is a preliminary prospectus?
    • This is called a red herring. It is used during the cooling off period and it omits the offer price, underwriting/dealer discounts, and proceeds to the issuer.
    • Once a final offering price is set, a final statutory prospectus must be filed.
  15. What is a summary prospectus?
    • A short-form prospectus used ONLY for mutual fund offerings
    • The investor must be informed that a statutory one exists.
  16. What is a free-writing prospectus?
    • This is a communication that doesn't meet the standards of a statutory prospectus.
    • This must include a legend recommending that investors read the statutory prospectus.
    • E.g. emails, press releases, and marketing materials
  17. What securities are exempt from SEC regulation?
    • US Gov't and agency securities
    • Municipal securities
    • Securities issued by banks
    • Securities issued by non-profits (church bonds)
    • Short-term corporate debt (maturities not exceeding 270 days) [corporate paper]
    • Securities issued by small business investment companies (<100 members) [hedge funds]
  18. If an investor in a Reg D private placement trade is not accredited, what must happen?
    • There must be a purchaser representative.
    • They can be appointed by a non-accredited investor to evaluate the risks
    • They may not be an officer, director or >10% owner/issuer unless they're related to the investor.
  19. What is a private placement memorandum?
    • It is like a prospectus for a a private placement. It is required for all investors if any non-accredited investors are included (but if there are none, it's not needed)
    • It includes the use of proceeds, suitability standards, and financials
  20. How can stock sold under Reg D be resold?
    Rule 144
  21. How are GO bonds issued?
    • They require voter approval
    • They are subject to debt limitations placed on the municipality which limits its ability to add debt above its debt ceiling
  22. How are revenue bonds issued?
    • No voter approval required
    • Consultant must produce a feasibility study
Card Set
SIE 11 - Offerings
SIE 11 - Offerings