Question answering from uploaded documents

Public Traditional Negotiated Cash Offer:

Explain the method, and how it will raise the firm's capital and how it will benefit both company and investors

Explain each of the three types in the table below and give examples on each type

Explain how each type of them is used in raising capital and how it benefits the firm and investors and underwriters ( If it will not benefit them please state it clearly)

With this method, the company works through an investment bank using the bank as an intermediary for selling its shares. This method may raise the firm's capital since the investment bank work towards making the shares more enticing, as well as sometimes serving as underwriter and using its reputation and skills to sell the stock. The investors may benefit since the bank's intervention grants a greater reliability and guarantee to the substance of the stock, and since the bank underwrites promise of rate or return.

An example in kind is where Ford may decide to sell its shares to the public employing the investment bank to serve as stockbroker or middleman and, thereby, as guarantor.

Firm commitment cash offer -- the company negotiates an agreement with the investment bank whereby the investment bank would underwrite and distribute their new shares. The company benefits since some of the shares are bought by the investment bank, underwritten and sold at a higher price. The investment bank profits since it chooses shares and makes a profit on those it sells. The investors benefit since they are offered a guarantee by a reliable and reputable authority.

Best efforts cash offer -- The investment bank agrees to sell as many shares as possible of the new company at an agreed upon price. The investment bank makes no guarantees about the amount of shares it will sell or the amount of cash it will raise. Both - firm and bank -- profit from labor invested into selling shares. The more shares sold, the greater the amount of profit. The investors may benefit from the fact that they are sold stock by a reliable authority.

Dutch auction cash offer -- The investment bank auctions shares for the new company. A given amount of shares are auctioned and go to bidders who bid the highest price. Advantage for the company is that it will be deriving highest price for a given number of shares and sometimes these prices may be higher than that which it initially expected. This also profits investment bank since investment bank shares form outcome and may reap higher margin this way. The investors may benefit from the fact that they are sold stock by a reliable authority.

1- Privileged Subscription:

a. Explain the method, and how it will raise the firm's capital and how it will benefit both company and investors

b. Explain each of the two types in the table below and give examples on each type

c. Explain how each type of them is used in raising capital and how it benefits the firm and investors and underwriters ( If it will not benefit them please state it clearly)

Privileged subscription in essence means that when a company buys another company / merges another one to its own, or starts a new division and so forth, its present customers gain privileged access to its stocks and are approached first. The company benefits by showing preference to its investors, by pleasing them, and by likely entrenching and securing their dedication. Investors benefit by having first selection of stock.

Ford opens a new business that deal with horticulture. It approaches its clients of the car business with the first selection of shares in this new business.

Direct right offer -- the company offers the new stock directly to its existing shareholders. In this way it does not need to pay for the service of a financial intermediary or lose out to them. I do not know whether the shareholders may benefit more if they were sold by bank or by company. It seems as if they may benefit equally either way as long as they are informed consumers.

Standby rights offer -- like the first method, existent shareholders gain privileged access and choice of right to buy of new stock. Proceeds / rate of return of this new stock are guaranteed to them by the underwriters. The benefit here is that potential shareholders are not only guaranteed security in their investment, but in both instances they are approached first and can choose initial selection of shares as wells highest shares if they so desire.

2- Nontraditional cash offer:

a. Explain the method, and how it will raise the firm's capital and how it will benefit both company and investors

b. Explain each of the two types in the table below and give examples on each type

c. Explain how each type of them is used in raising capital and how it benefits the firm and investors and underwriters ( If it will not benefit them please state it clearly)

Nontraditional cash offer differs from traditional cash offer int that the company takes an alternate route. Instead of working through an investment bank, auctions the underwriting task to highest bidder and/or sell shares arbitrarily over a 2-year period. This is a risky venture in both cases for company since, although it may be receiving higher prices than planned, it may also not be working via an expert.

Ford sells its shares via other qualified companies who sell them over a 2-year bloc. Alternately, Ford may decide to auction guarantee of shares to the highest bidder who will serve as middleman.

Shelf cash offer -- Qualifying companies can authorize shares that they expect to sell over a 2-year period and sell them when needed. This may be safe for company since they know the companies whom they are selling to and since they have steady investors at least for a 2-year period. However it is risky in that selling of shares is unpredictable. Underwriters can benefit since they can sell when needed. This may be risky for investors since they have to rely on selling companies whose reputation and integrity may be in question.

Competitive firm cash offer -- company can sell underwriter task via auction to highest bidder rather than through negotiation. On the one hand, this may profit company since they may receive a higher price than expected for task. On the other hand, this is risky since underwriter may lack reputation and integrity as well as doing poor job, subsequently in selling shares. Underwriter too is taking a risk as are investors..