In a registered primary distribution, which statement is FALSE?
A. The offering is made at the POP
B. The purchaser must receive a prospectus
C. The proceeds from the sale go to selling shareholders
D. The issue cannot be purchased on margin
C. The proceeds from the sale go to selling shareholders
Underwritten offerings can be primary or secondary offerings (or both at the same time!).
Assume that a privately held company wants to go public. The company wants to raise $300,000,000. To do this, the company will be issuing $150,000,000 of new shares (this is the primary portion of the distribution, where the proceeds of the sale go to the issuer) and another $150,000,000 consists of shares being sold by officers and directors of the company (who now want to cash out some or all of there investment in the company). The proceeds from the secondary portion go to the selling shareholders.
This is a combined primary and secondary offering. All shares are sold with a prospectus at the POP and full payment is required (which is the case for any prospectus offering).
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