Case Study

•Money Markets: the market where short-term securities are bought & sold•Capital Market: the market where long-term securities such as stocks & bonds are bought & sold•Primary Market: the market in which new issues of securities are sold to the public•Secondary Market: the market in which securities are traded after they have been issued•Initial Public Offering (IPO)–First public sale of a company’s stock–Requires SEC approval•3 Choices to Market Securities in Primary Market–Public offering–Rights offering–Private Placement •Underwriting the offering: promoting the stock & facilitating the sale of the company’s shares•Prospectus: registration statement describing the issue & the issuer•Red Herring: preliminary prospectus available during the waiting period•Quiet Period: time period after prospectus is filed when company must restrict what is said about the company•Road Show: series of presentations to potential investors•Underwriting the Issue: purchases the security at agreed-on price & bears the risk of reselling it to the public•Underwriting Syndicate: group formed by investment banker to share the financial risk of underwriting•Selling Group: other brokerage firms that help the underwriting syndicate sell issue to the public•Tombstone: public announcement of issue & role of participants in underwriting process•Investment Banker Compensation: typically in the form of a discount on the sale price of the securities•Secondary Market: the market in which securities are traded after they have been issued Role of Secondary Markets–Provides liquidity to security purchasers–Provides continuous pricing mechanism•Securities Exchanges: forums where buyers & sellers of securities are brought together to execute trades•Nasdaq Market: employs an all-electronic trading platform to execute trades•Over-the-counter (OTC) Market: involves trading in smaller, unlisted securities•Broker Markets: consists of national & regional securities exchanges–60% of the total dollar volume of