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Chapter 5-8, 17, 4

private equity

equity financing for nonpublic companies

venture capital VC

financing for new, often high-risk ventures

unseasoned equity offering

another name for IPO, b/c shares are not available to the public before the IPO

seasoned equity offering (SEO)

also known as secondary and follow-on offering

general cash offer

securities or SEO offered to the public on a first-come first serve basis

rights offer

securities initially offered only to existing owners


a group of underwriters formed to share the risk and to help sell an issue

firm commitment underwriting

when issuer sells the entire issue to the underwriters

best efforts underwriting

underwriter doesn't guarantee any particular amount of money to the issuer

dutch auction underwriting

also known as uniform price auction b/c all successful bidders pay the same price

red herring

a preliminary prospectus among investor to generate interest in the stock offering


detailed acct of company's financial position, its operations, and its investment plans for the future which is submitted to SEC for approval

three ways of the secondary market

1directly with other investors
2indirectly through a broker who arranges transactions with others
3directly with a dealer who buys and sells securities from inventory

dealer v. broker

dealer- has inventory like car dealer
broker- brings buyers and sellers together (like real estate broker)

bid v. ask

bid- price dealer is willing to pay
ask- price dealer will sell at

exchange members at the NYSE

people who own seats at the exchange

commission brokers

500 NYSE members are commission brokers who execute customer orders to buy and sell stock transmitted to the trade floor


an NYSE member acting as a dealer in a small number of securities on the exchange floor; aka market maker;
can trade for their own accounts and stand ready to trade at quoted bid and ask prices;

earns money through the spread, but not commission like brokers do

floor brokers

NYSE member who execute orders for commission brokers on a fee basis; aka $2 brokers

SuperDOT system

-for communication
electronic NYSE system allowing orders to be transmitted directly to the specialist

floor traders

NYSE member who trade for their own accts; trying to anticipate temporary price fluctuations

NYSE Hybrid Market

-for efficient trading
not used in 1. less liquid stocks 2. during the opening and close of trading sessions 3. during times of market duress

NYSE minimum requirements

1. at least 2200 shareholders and average monthly trading volume for the most recent six months must be at least 100,000 shares
2. at least 1.1 million stocks shares in public hands
3. must be at $100 million in market value ($60 million for IPOS)
4. aggregate earnings of $10 million before taxes in the previous three years

third market v. fourth market

trading that occurs off the exchange on which the security is listed and fourth market is the direct trading of exchange-listed securities maong investors

over-the counter market

securities market where dealers buy and sell securities for their own inventories; NASDAQ is one example

electronic communications networks (ECNs)

NASDAQ was opened to his which is a website that allowed investors to trade directly with one another;


NASDAQ is a computer network with no physical location and has a multiple market maker system rather than a specialist system

limit v. stop orders

stop order is where the customer specifies a stop price in which once it's reached, it is converted into a market order

with regard to NASDAQ, what are inside quotes?

the highest bid and lowest offer price quoted among market makers for a security

stop-sell v. stop-buy

order to sell shares if the stock price falls to a specified stop price above the current stock price; also called stop-loss b/c it is usually intended to limit losses on a long position

stop-limit order

once the stock price reaches the preset stop price the order is converted ito a limit order

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