This section is from the book "Problems In Private Finance", by Charles W. Gerstenberg. See also: The Private Equity Edge: How Private Equity Players and the World's Top Companies Build Value and Wealth.
1. Assume that A owns $5,000 shares of stock and $500,000 worth of bonds of the Hartford and N. Y. Transp. Co. (pp. 749-750). The company increases its capital stock by $2,500,000. A syndicate offers to buy all of the new stock at $125. All of the stockholders except A agree to accept the offer of the syndicate. A objects. Later the company sells to the syndicate all of the new stock at $125. Immediately thereafter the stock is quoted at $150 per share. What right has A? (Stokes v. Continental Trust Co., 186 N. Y. 285.)
2. If the treasury stock had been sold to the syndicate, would your answer be different?
3. If the company had merged with another corporation and had given the new $2,500,000 worth of stock in exchange for the stock of the other corporation, would A have had any right to subscribe to the new stock?
4. In June, 1911, American Telephone and Telegraph stock was selling at 150. What was the value of the right referred to on p. 1014? (See p. XV of Materials.)
5. What disposition could you make of the rights in problem 4, or how could you "cash your privilege"?
6. Is the common or preferred stock of the following companies an investment as investment is defined in the Syllabus? May Department Stores (p. 767); Bethlehem Steel Corp. (p. 761); American Smelting & Refining Co. (p. 759); Chicago, Milwaukee & St. Paul R. R. Co. (p. 753); Midwest Refining Co. (p. 766); United Light and Power Co. (p. 764).
7. Are the Chicago, Milwaukee & St. Paul general 4's legal investments under the laws of the State of New York? (pp. 753-758, and pp. 447-54.)
8. Why did the B. and O. pay dividends in 1908 (pp. 625-6), although they were not earned in that year?
9. You have patented a new toy that will cost about 5 cents to manufacture and will sell at about $1. Describe fully how you would go about financing the proposition.
10. Why is the practice of selling securities to customers more appropriate for public utilities than for industrials?
11. What are the earmarks of a fraudulent prospectus?
(This requires a comparative study of fraudulent and honest prospectuses given on pp. 367-404.)
12. Point out the fallacies in the argument on p. 398.
13. What has happened to the business described on pp. 399-403, and why?
14. Draw up a bond circular for the bonds of the Mortgage Bond Co. (pp. 255-298) similar to the circular for the Jones-Laughlin Steel Company bonds (pp. 374-6). Omit the letter.
15. Submit in writing a three-inch one-column advertisement for one of the above mentioned bonds. Indicate the layout by lines and give the wording separately. Make the advertisement dignified, but play up strongly in the headline the most important reason for buying the bond.
16. What, in brief, are the requirements for listing securities on the New York Stock Exchange? (See pp. 151-61.)
17. What is the advantage of listing securities on the stock exchange, (a) to the underwriters of a new issue, (b) to the corporation?