Chapter 23
What sources of equity funding are there?
Angel Investors, Venture Capital, Private Equity etc..
what is a convertible note
it’s a security convertible into equity when the company finances with equity for the first time
What are the primary differences between venture capital and private equity?
While VC focuses on start-ups and early stage investments, PE tends to invest more into mature companies.
What is a bond covenant?
Restrictions or requirements placed on a borrower in a bond agreement. Their purpose is to protect bondholders by preventing excessive risk taking and moral hazard.
What forms of Initial Public Offering are there?
briefly explain them
best efforts IPO: The underwriter doesn't guaranty that the stock will be sold
firm commitment IPO:The underwriter guaranties to sell all the shares
Auction IPO: The market determines the price of the stock through auctions
What is the difference between secured and unsecured debt?
Secured debt is backed by collateral, which can be seized if the borrower defaults.
Unsecured Debt: Debt that is not backed by collateral and is based solely on the borrower’s creditworthiness.
why do angel financers use convertible notes
because angel financing aften occurs at such an early stage in the business that it is difficult to assess the value of the firm
Why do traders often report the yield-to-call? and how does it differ from the the yield-to-maturity
Making the assumption that a that the call options wont to executed is not always realistic. The yield to call represents the yield if the bond is called at earliest maturity.