Fundamentals of Corporate Finance
Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 26, Problem 9CRCT
Summary Introduction

To discuss: Whether it will make any sense for the management of a company, in which Person X has owned stock, to prefer the lower offer in the given situation and the influence of the lower offer towards the payment form.

Introduction:

The transfer of control of a company from one shareholder’s group to another is termed as takeover.

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6. IPO price stabilization Which of the following strategies can underwriters use to prevent institutional investors from flipping? Check all that apply. They can require an overallotment clause in the underwriting agreement of the IPO. They can agree to make more shares of future IPOS available to investors that hold on to the initial shares for a relatively long period of time. They can require a lockup clause in the underwriting agreement of the IPO. They can agree to sell the shares in the IPO at a lower price than suggested by their bookbuilding analysis.
QUESTION 43 If the bid fails in a hostile tender offer, what impact will it have on the market price?      A. Market price falls because the minority owner was unable to complete the offer   B. Market price stays the same because it is apparent that no one wants to buy the stock   C. Market price increases because the minority owner has signaled to the market that shares are worth  more   D. None of the above
V3.   Which of the following statements about IPO is correct? O In a market without agency problem, Dutch auction is the worst among the three IPO methods in terms of finding out the best reservation price of the IPO shares • In a firm commitment cash offer, the underwriter would buy the whole issue from the issuer, and then sell the issue to the market. O Best efforts cash offer is the most popular IPO method in the US market. • In the best efforts cash offer, a firm would have to continue the issuance even if the demand does not meet their expectation.
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