Series 24- Underwriting
IPO - correct answer ✔✔Initial public offering, a corporation's first offer to sell shares to the public
follow-on offering - correct answer ✔✔the sale to the public of additional newly created shares by a
company the is already public
underwriting syndicate - correct answer ✔✔a group of other bankers formed by an investment banker to
share the financial risk associated with underwriting new securities
firm commitment underwriting - correct answer ✔✔the type of underwriting in which the underwriter
buys the entire issue, assuming full financial responsibility for any unsold shares
Best Efforts Underwriting - correct answer ✔✔the type of underwriting in which the underwriter sells as
much of the issue as possible, but can return any unsold shares to the issuer without financial
responsibility
best efforts all or none underwriting - correct answer ✔✔underwriters act as agents for the issuer and
attempt to sell as much of the offering as possible, however, if the entire issue is not sold any sales that
had been made must be cancelled and the money returned to subscribers
Best Efforts Mini-Maxi underwriting - correct answer ✔✔issuer sets a minimum threshold of sales that
must be met in order so that the offering is not cancelled.
Standby Underwriting - correct answer ✔✔Syndicate agrees to buy any shares that are not purchased by
the stockholders in rights offering
syndicate manager - correct answer ✔✔managing underwriter; invites other broker dealers to
participate in distribution
, syndicate agreement - correct answer ✔✔an agreement among underwriters which will set forth the
terms of the offering and each underwriter's percentage participation in the offering and sale. role is
guarantee the sale
Selling Group - correct answer ✔✔other brokerage firms that help the underwriting syndicate sell issue
to the public. do NOt assume financial liability, act as placement agents
Green Shoe Clause - correct answer ✔✔allows underwriters to buy additional shares from the issuer and
sell those shares (maximum of 15%) if an issue is oversubscribed.
Market-Out Clause - correct answer ✔✔Escape clause sometimes written into underwriting agreements
which allows the underwriters to be released from their purchase commitment if material adverse
developments affect the securities markets.
at-the-market offering - correct answer ✔✔issuers with existing shares can use this offering to raise
capital and issue shares over an extended period, rather than all at once. Only for companies eligible to
use Form S-3 or F-3. Pricing based on current secondary market value of the company's existing shares
Jump Ball Basis - correct answer ✔✔this process sets aside shares for institutional clients and allows all
members to compete for orders
free retention - correct answer ✔✔Amount that an underwriter is allotted for placement to its own
clients. sales to retail clients are often filled from this amount.
primary market - correct answer ✔✔the market in which new securities are originally sold to investors
secondary market - correct answer ✔✔the market in which previously issued securities are traded
among investors, not listed on an exchange
Third Market (OTC Listed) - correct answer ✔✔-Nasdaq Inter-Market
-exchange listed securities are traded in the OTC
-All securities on the NYSE and most securities listed on the regional exchanges are eligible for OTC
trading as long as trades are reported to the Consolidated Tape within 90 seconds of execution
IPO - correct answer ✔✔Initial public offering, a corporation's first offer to sell shares to the public
follow-on offering - correct answer ✔✔the sale to the public of additional newly created shares by a
company the is already public
underwriting syndicate - correct answer ✔✔a group of other bankers formed by an investment banker to
share the financial risk associated with underwriting new securities
firm commitment underwriting - correct answer ✔✔the type of underwriting in which the underwriter
buys the entire issue, assuming full financial responsibility for any unsold shares
Best Efforts Underwriting - correct answer ✔✔the type of underwriting in which the underwriter sells as
much of the issue as possible, but can return any unsold shares to the issuer without financial
responsibility
best efforts all or none underwriting - correct answer ✔✔underwriters act as agents for the issuer and
attempt to sell as much of the offering as possible, however, if the entire issue is not sold any sales that
had been made must be cancelled and the money returned to subscribers
Best Efforts Mini-Maxi underwriting - correct answer ✔✔issuer sets a minimum threshold of sales that
must be met in order so that the offering is not cancelled.
Standby Underwriting - correct answer ✔✔Syndicate agrees to buy any shares that are not purchased by
the stockholders in rights offering
syndicate manager - correct answer ✔✔managing underwriter; invites other broker dealers to
participate in distribution
, syndicate agreement - correct answer ✔✔an agreement among underwriters which will set forth the
terms of the offering and each underwriter's percentage participation in the offering and sale. role is
guarantee the sale
Selling Group - correct answer ✔✔other brokerage firms that help the underwriting syndicate sell issue
to the public. do NOt assume financial liability, act as placement agents
Green Shoe Clause - correct answer ✔✔allows underwriters to buy additional shares from the issuer and
sell those shares (maximum of 15%) if an issue is oversubscribed.
Market-Out Clause - correct answer ✔✔Escape clause sometimes written into underwriting agreements
which allows the underwriters to be released from their purchase commitment if material adverse
developments affect the securities markets.
at-the-market offering - correct answer ✔✔issuers with existing shares can use this offering to raise
capital and issue shares over an extended period, rather than all at once. Only for companies eligible to
use Form S-3 or F-3. Pricing based on current secondary market value of the company's existing shares
Jump Ball Basis - correct answer ✔✔this process sets aside shares for institutional clients and allows all
members to compete for orders
free retention - correct answer ✔✔Amount that an underwriter is allotted for placement to its own
clients. sales to retail clients are often filled from this amount.
primary market - correct answer ✔✔the market in which new securities are originally sold to investors
secondary market - correct answer ✔✔the market in which previously issued securities are traded
among investors, not listed on an exchange
Third Market (OTC Listed) - correct answer ✔✔-Nasdaq Inter-Market
-exchange listed securities are traded in the OTC
-All securities on the NYSE and most securities listed on the regional exchanges are eligible for OTC
trading as long as trades are reported to the Consolidated Tape within 90 seconds of execution
