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...
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…
