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. Which of the methods of underwriting does the agreement of the underwriting syndicate of the Republic of Cuba 5 per cent Gold Bonds of 1904 illustrate? (pp. 405-411.)
2. If the bonds of the Republic of Cuba, during their sale by the syndicate, were to be offered by outside purchasers at a price below that being asked by the syndicate managers, what could they do? (pp. 405, et seq., and p. 435.)
3. If you were a subscriber to the extent of $1,000,000 in the agreement referred to in the first problem, what would be your possible maximum loss?
4. Suppose the Chicago Telephone Company, in 1911, increased, its capital stock by $5,000,000 (p. 865); a syndicate was formed to underwrite the sale of the new stock and you participated to the extent of $500,000. What would be your maximum loss?
5. If the bonds in problem 1 were not sold quickly enough to raise the money as the Republic of Cuba required it, what could the, managers of the syndicate do? (pp. 405-411; see also p. 769-782.).
6. Suppose instead of the bonds mentioned in the letter on p. 769, it had been proposed to buy $1,500,000 worth of the Jones-Laughlin mortgage bonds (pp. 183 et seq.). Draw up the complete agreement between the parties (pp. 771 et seq.). Note: Where a clause is to be copied verbatim from the book you can indicate it as follows: "Here follows the 3rd paragraph on p. 781"; where blanks have to be filled in or changes made, give the text of your agreement in full.
7. Outline very briefly the salient features of an agreement (a) between the manager of a syndicate and a company about to build, within 10 months 20 miles of interurban railway track at $50,000 a mile, and (b) between the manager and the participants.
8. Would you have advised the American Telephone and Telegraph Co. (p. 1014) to have the sale of its new stock underwritten by bankers, assuming that the market price of the old stock at that time was 150?