Series 79 pt 2 Questions and Answers
If the board of directors of a target company wishes to solicit suggestions on choosing the adviser who will write the fairness opinion, to whom should it turn?
Objective outsider
The key is to select someone capable of true objectivity, who is not close ...
if the board of directors of a target company wish
large accelerated filers are subject to the same
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Series 79 pt 2 Questions and Answers
If the board of directors of a target company wishes to solicit suggestions on choosing
the adviser who will write the fairness opinion, to whom should it turn? - answer
Objective outsider
The key is to select someone capable of true objectivity, who is not close to deal terms
and does not stand to benefit from a completed deal.
"large accelerated filers" - answer are subject to the same size requirement as well-
known seasoned issuers: $700 million of worldwide non-affiliate market capitalization
(voting and non-voting stock).
Form C - answer Any changes in the Form C information must be updated within five
business days after reaching 50% of the target raise, and then again five business days
after reaching 100% of the target raise. So, if any information has changed by
November 1, the company must update it within five business days. Remember that it's
the 50% and 100% thresholds (based on the target raise) that trigger the updating
requirement.
Reg S eligability - answer The keys to Regulation S eligibility are residence and
where the offer is made, not citizenship. Both must be outside the U.S. A green card
holder is generally considered to be a resident of the U.S., so he would have to
establish legitimate residency outside the U.S. and be shown the offer outside the U.S.
Firm Commitment - answer A firm commitment is seen in almost all underwritten
transactions. In this scenario, the underwriters make a commitment to buy the securities
as opposed to using their best efforts to find investors.
An investor group makes a tender offer to acquire 12% of ABC Corp.'s common shares.
ABC is a public company with a large and diverse shareholder base. How must ABC's
board of directors respond to this offer? - answer The board of directors of a
company that receives a tender offer must respond with an SEC filing, including facts
about the tender offer and a recommendation to shareholders, within 10 business days.
The filing is made on Schedule 14D-9.
LBO and cash flows - answer In LBO transactions, private equity firms want to
acquire firms using a large amount of debt and then pay down that debt with the firm's
own cash flows.
frequencies of statements - answer Form 10-Q is filed quarterly and Form 10-K is
filed annually. Form 8-K is a form used to report a variety of material unscheduled
current events, and most large companies file many 8-Ks per year. Proxy statements
, permit shareholders to vote and are used to elect board members, so they are used
infrequently
Price to Book Ratio - answer market price per share/equity book value per share
What change to the calculation could increase economic profit? - answer decrease
cost of capital
at the market - answer "At the market" means that a clear public market exists, and
that market is not controlled by the broker dealer making the offer, or a syndicate in
which they participate. Under SEC Rule 15c1-8, such an offer is considered
manipulative, deceptive or fraudulent if another market does not exist.
MAC - answer A MAC stands for material adverse change; also called material
adverse effect (MAE). This is a highly negotiated provision in the definitive agreement,
which may permit a buyer to avoid closing the transaction in the event that a substantial
adverse situation is discovered after signing or a detrimental post-signing event occurs
that affects the target.
communications with the public are permitted prior to the SEC declaring a registration
statement effective? - answer preliminary prospectus (red herring)
tombstone ad
conforming road show presentations.
GARP investors - answer GARP investors prefer low PEG ratios (less than 1.0).
PEG = P/E ratio divided by earnings growth rate. To get to a PEG of 1.0 or lower,
growth rate needs to be at or above P/E.
All of the following are typically found in a proxy statement EXCEPT - answer
previous voting record of each board member
A+ - answer Regulation A+ permits an exemption from filing a registration statement
with the SEC for U.S. and Canadian issuers if the sum of all cash and other
consideration to be received for the securities does not exceed $75,000,000.
Bankers assess a potential buyer's ability to pay on the basis of all of the following
EXCEPT - answer A potential buyer's pro forma working capital ratios and PPE do
not tend to be important indicators for the company's ability to pay.
In an underwriting with a conflict of interest as defined by FINRA Rule 5121, what is true
about a Qualified Independent Underwriter? - answer QIU's must perform proper due
diligence, just like the syndicate members. Failure to do so could leave them legally
responsible.QIUs, should have participated in at least three underwritings of at least half
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