1. Who are "venture capitalists"? What role do they play in helping start-up companies? They investors who help start a company. The money is provided by professions who help with the growing company. Venture capitalists are an important source of equity for growing companies. Venture capitalist help finance new companies with purchasing equity securities as well as help in the development of new products and services. 2.
Name at least 4 large investment banking companies. Morgan Stanley, Merrill Lynch, Goldman Stacks on, Lee man Bros and CSFB. 3. When were trading commission on stocks deregulated and how did this affect investment bank revenue? Apart from trading commissions, name two other sources of revenue for investment banks. May 1 st 1975 was when trading commission stocks were deregulated. The investment banks were affected regarding there revenues because the brokerages changed from a fixed commissions for securities to a negotiable one.
Other sources of revenue are commissions and 7% earned to investment bankers. 4. What is an IPO? Who allocates these IPO's? Who receives them and on what basis? An IPO is where a company offers its stock to public investors for the first time. IPO's are allocated through investors. IPO's are usually distributed though underwriters who then sell the shares to institutions and to the preferred customers. 5.
What is meant by the term "flipping"? Give a specific example. Why is this harmful for the company that just issued the stock? Flipping is done when shares of a stock are leftover. The investor flips the share to the public individual investors and small institutions. They then can only purchase the share through a stock broker. These shares are usually bought and sold within a matter of minutes. 6.
Where is the conflict of interest involved with recommendation of a stock broker working for an investment bank? The conflict of interest involved has to do with purchases of the shares by individuals. The way this works is that the investor basically advertises the stock to the public in various ways. 7. What is a Dutch auction? How is this different from a traditional IPO? Discuss at least two of its advantages. Which company in the last few months used the Dutch auction to issue its IPO? This type of auction is done through the internet.
It is different from an IPO because anyone can buy the share, not just certain people like the top people of the company. A Dutch auction works by a clearing price, and who ever bids above that clearing price will be able to purchase the share. For example, if there were a 50 shares available at a price of $10 per share and the last shares was bide d at $15, then the new clearing price would be $15. In the last few months Google used the Dutch auction.