Rank the following in terms of their issuing costs, from highest to lowest: I. Preferred equity
II. Convertible debt
III. Initial public offerings
IV. Seasoned public offerings

Question

Quizplus · Accepted Answer

Initial public offerings (IPOs) generally have the highest issuing costs, as they involve extensive legal and regulatory processes. Seasoned public offerings (SPOs) have lower issuing costs as they are often simpler and quicker than IPOs. Preferred equity generally has higher issuing costs than convertible debt, as it requires more extensive negotiations and due diligence. Therefore, the correct ranking from highest to lowest issuing costs is III, IV, I, II. Therefore, option B is correct. Initial public offerings typically have the highest issuing costs due to the extensive legal and regulatory requirements. Seasoned public offerings follow next in terms of cost, as they involve additional complexities in pricing and timing. Preferred equity issuance typically involves underwriting fees and other expenses, but can be less expensive than IPOs and SPOs. Convertible debt can have lower issuing costs relative to equity offerings, as they are debt instruments that can be converted into equity at a later date.

Rank the Following in Terms of Their Issuing Costs, from Highest