Excerpt from Underpricing of Seasoned Issues Two methods exist for raising equity capital on financial markets the rights and underwritten offerings. In the rights offering current shareholders receive a right from the firm giving them an option to purchase additional shares at a pre-specified exercise price. Under this method the firm receives capital from the sale of new shares to holders of the rights. Current shareholders either use their rights to purchase new shares or sell the rights in the financial markets. In a firm commitment underwritten offering the investment banker purchases the new shares from the firm and then offers the shares for sale to the public. The investment banker announces an initial offering price. If the issue is oversubscribed at this price then the shares are rationed among buyers. In the event that the shares cannot be sold at the initial offering price, the underwriter is forced to lower the price. In the firm commitment arrangement the firm's proceeds are guaranteed and the risk is borne by the underwriter. Under this arrangement current shareholders may sell their shares in the market after announcement of the new issue. Like other investors they may buy more shares from the underwriter. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.