(BQ) Part 2 book "Corporate finance" has contents: Efficient capital markets and behavioral challenges, dividend and other payouts, valuation and capital budgeting for the levered firm, issuing securities to the public, options and corporate finance, warrants and convertibles, cash other contents. | PART V Long-Term Financing CHAPTER 20 Issuing Securities to the Public In an eagerly awaited initial public offering (IPO), credit card giant Visa went public on March 19, 2008. Assisted by JPMorgan, Goldman Sachs, and Bank of America, Visa sold about 447 million shares of stock to the public at a price of $44. In a nod to the public’s unfortunate fascination with credit, the stock price jumped to $ at the end of the day, a 28 percent increase. The Visa offer raised a total of $ billion, easily the largest IPO in . history. The previous record-holder was the AT&T Wireless offering in 2000, which raised $ billion. In this chapter, we will examine the process by which companies such as Visa sell stock to the public, the costs of doing so, and the role of investment banks in the process. Businesses large and small have one thing in common: They need long-term capital. This chapter describes how they get it. We pay particular attention to what is probably the most important stage in a company’s financial life cycle—the IPO. Such offerings are the process by which companies convert from being privately owned to publicly owned. For many people, starting a company, growing it, and taking it public is the ultimate entrepreneurial dream. The Public Issue When firms want to raise new funds, they can do so by issuing securities publicly or privately. We first describe the public issue. The basic steps in a public offering are depicted in Table . The Securities Act of 1933 sets forth the federal regulation for all new interstate securities issues. The Securities Exchange Act of 1934 is the basis for regulating securities already outstanding. The SEC administers both acts. Table The Process of Raising Capital The Basic Procedure for a New Issue 1. Management’s first step in any issue of securities to the public is to obtain approval from the board of directors. 2. Next, the firm must prepare and file a registration statement .
