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SPMA 2P27 questions with verified answers graded A+/passed
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SPMA 2P27 questions with verified answers graded A+/passed
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SPMA 2P27Initial Public Offering (IPO) - correct answer ✔✔- First sale of stock by a private company to investors
o Also known as going public
- For investors, can an IPO be a risky investment?
o Could be risk is that you lose money
COS. Advantage of going public - correct answer ✔✔1. Owners can diversify
2. Liquid asset is created
3. Spread risk
4. Reduce interest charges (ratios)
5. Increased awareness
6. Value established
7. RAISE NEW CAPITAL FOR...
Disadvantages of going public - correct answer ✔✔- Costs (reporting)
- Disclosure
- Self-dealing and nepotism are not allowed (issue??? family members)
- Risk of falling stock price (why matters? risk of people selling when stocks go down. Looks bad)
case: Airhead (not publically traded)
IPO raises $100 millions assumes 10,000,000 @ $10 STOCK price drops 50% to $5
How much money does the company have?
How much money do the shareholders have? - correct answer ✔✔- How much money does the
company have? $100 million
- How much money do the shareholders have? $50 million
Considering buying??
, Influences: - correct answer ✔✔- Industry
- Comparatives
- Brand
- Management
- Product
- Market sentiment
- Research
- Press
- Institutional holdings
- Charts (same family)
- Quants (SF)
- Forecasts (SF)
- Spread your risk!!!
Industry and issues to consider - correct answer ✔✔o Ex. Callaway Golf sits in the sporting goods
industry
o Drill down... "golf" industry
o Issues to consider:
♣ Size
♣ Cos standing
♣ Capacity
♣ Competitors
♣ Current events
- Comparatives
market cap equation - correct answer ✔✔o Ex. Nike, UA, Adidas, Columbia
o Market capitalization (how big is the company?)
♣ Dollar value of all outstanding shares
• Market cap = # shares x current price
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