What is shelf registration? How does it differ from the trad itional requirements for security offerings? Shelf registration permits large companies to file one comprehensive registration statement(under SEC Rule 415). This statement outlines the firms plans for future long-term financing. Then, when market conditions appear to be appropriate, the firm can issue the securities without further SEC approval Shelf registration is different from the trad itional requirement that security issuers file a detailed registration statement for SEC review and approval each and eve ry time they plan a sale Comment on the market performance of companies going public, both immed iately after the offering has been made and some time later. Relate this to research that has been done in this area Due to underpricing by the investment banker, there is often a positive excess return immediately after the offering. With the passage of time, the efficiency of the market begins to become evident and long-term sustainable performance is very much dependent on the quality of the issue and market cond itions Discuss the benefits accruing to a company that is traded in the public securities mar The benefits of having a publicly traded security are a. Greater ability to raise capital b. Add itional prestige and visibility that can be helpful in bank negotiations, executive recruitment, and the marketing of products Increased liquid ity for existing stockholders d. Ease in estate planning for existing stockholders e. An increased capability to engage in the merger and acquisition process 15-9 What are the disad vantages to being public? The disad vantage of being public are a. All information must be made available to the public through SEC and state filings. This can be very expensive for a small company b. The president must be a public relations representative to the investment community c. Tremendous pressure is put on the firm for short-term performance d. Large downside movement in the stock can take place in a bear market e. The initial cost of going public can be very expensive for a small firm S-525 Copyright C2005 by The McGraw-Hill Companies, IncCopyright © 2005 by The McGraw-Hill Companies, Inc. S-525 15-6. What is shelf registration? How does it differ from the traditional requirements for security offerings? Shelf registration permits large companies to file one comprehensive registration statement (under SEC Rule 415). This statement outlines the firm's plans for future long-term financing. Then, when market conditions appear to be appropriate, the firm can issue the securities without further SEC approval. Shelf registration is different from the traditional requirement that security issuers file a detailed registration statement for SEC review and approval each and every time they plan a sale. 15-7. Comment on the market performance of companies going public, both immediately after the offering has been made and some time later. Relate this to research that has been done in this area. Due to underpricing by the investment banker, there is often a positive excess return immediately after the offering. With the passage of time, the efficiency of the market begins to become evident and long-term sustainable performance is very much dependent on the quality of the issue and market conditions. 15-8. Discuss the benefits accruing to a company that is traded in the public securities markets. The benefits of having a publicly traded security are: a. Greater ability to raise capital. b. Additional prestige and visibility that can be helpful in bank negotiations, executive recruitment, and the marketing of products. c. Increased liquidity for existing stockholders. d. Ease in estate planning for existing stockholders. e. An increased capability to engage in the merger and acquisition process. 15-9. What are the disadvantages to being public? The disadvantage of being public are: a. All information must be made available to the public through SEC and state filings. This can be very expensive for a small company. b. The president must be a public relations representative to the investment community. c. Tremendous pressure is put on the firm for short-term performance. d. Large downside movement in the stock can take place in a bear market. e. The initial cost of going public can be very expensive for a small firm