FİNANSAL PİYASALAR VE KURUMLAR - Deneme Sınavı - 8

Liquidity risk, which is the risk that a bank may not be able to meet its cash needs by selling assets or raising funds at a reasonable cost.

Credit risk, which is the risk of changes in the economic value of the bank’s assets due to unexpected changes in the creditworthiness of counterparties.

In the direct market, investment banks are the most important participants.

Merrill Lynch, presumably to avoid a bankruptcy filing, agreed to sell their firm to Bank of America at a significant discount to historical prices by the end of 2008

Investment-banking firms are mostly involved in security market operations.

The main business of investment banking is raising debt and equity financing for corporations or governments. This involves originating the securities, underwriting them, and then placing them with investors.

By law, investors must be presented with a prospectus before they can invest in a new security.

In a private placement, securities are sold to a limited number of investors rather than to the public as a whole.

Acquiring corporations require help in locating attractive corporations to pursue, soliciting stockholders to sell their stocks in a process called a tender offer

Bridge financing is just a temporary loan until permanent financing is obtained.

Valuation, strategy, and tactics are the key aspects of the advisory services offered by an investment-banking firm. Impetuosity is opposite of tactics

An investment-banking firm might recommend that a corporation engage in a divestiture, in which it sells one or more of its existing divisions that suffered recent losses.

Universal banks are institutions that are allowed to accept deposits, make loans, underwrite securities, engage in brokerage activities, and sell and manufacture many other financial services such as insurance.

Goldman Sachs and Morgan Stanley turned into bank-holding companies; the US Federal Reserve (Fed) forced Bear Stearns into the arms of JP Morgan to avoid a bankruptcy; Lehman Brothers filed for bankruptcy protection after the Fed and Treasury Department ignored its requests for government support; and Merrill Lynch, presumably to avoid a similar bankruptcy filing, agreed to sell their firm to Bank of America at a significant discount to historical prices.

The prospectus acts as a marketing tool as the firm tries to persuade investors to apply for shares.

The most important types of offering in the sale of new securities can be classified as initial public offering or unseasoned offering, secondary common stock offering or seasoned offering, and bond offering.

When an investment-banking firm buys the securities from the issuer and takes the risk of selling the securities to investors at a lower price, it is referred to as an underwriter.

Resisted acquisitions are called hostile.

Acquiring corporations require help in locating attractive corporations to pursue, soliciting stockholders to sell their stocks in a process called a tender offer.

Investment banking firms may suggest steps their customers should take to avoid a merger or takeover known as poison pills.

An issue may also be oversubscribed, and that means there are more offers to buy than there are securities available.

A syndicate is a group of investment banking firms, each of which buys a portion of the security issue.

1. A potential target adds to its charter a provision where, if another company acquires one third of the shares, other shareholders have the right to sell their shares to that company for twice the recent average share price. 2. A potential target grants to its key employees stock options that vest (i.e., can be exercised) in the event of a takeover. This is liable to create an exodus of key employees immediately after a takeover, leaving an empty shell for the new owner. 3. A potential target adds to its charter provisions making it impossible for a new owner to get rid of existing directors for one or two years after an acquisition. 4. A potential target issues preferred shares that automatically are converted to regular shares when there is a change in control. 5. A potential target adds a provision where existing shareholders have the right to purchase shares at a discounted price during or after a takeover. 6. A potential target changes the voting structure so that shares owned by management have more votes than those owned by others.