Management and Organizational Studies 2310A/B Chapter Notes - Chapter 15: Mezzanine, Seed Money, Exit Strategy

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Shang Tang

Document Summary

Issuer sells the entire issue to 1 investment dealer or to a group that attempts to resell it. Investment dealer assumes all price risk: dealer usually markets the prospective issue to a few large, institutional investors. Investment dealers: the hear tof new security issues, provide advice, market the securities, and provide a guarantee of the amount an issue will raise. Must be underpriced to attract investors: relatively few ipo buyers will actually get the initial high average returns observed in ipos and many will actually lose money. New equity sales and the value of the firm: managerial information- if management has superior information about the market value of the firm, it may know when the firm is overvalued. Issue costs- substantial costs associated with selling securities. Direct fees paid by the issuer to the underwriting syndicate- the difference between the price the issuer receives and the offer price.