Aggregate offering price, less sales in the prior 12 months. A rolling window, not a fixed pool. NOT a one-time-only $10M allowance.
The method for this kind of question
506(b) and 506(c) trade opposite things
Now answer
1 question on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.
Question 1Above the exam
A company sells 2,000,000 newly issued shares for the first time to the public, while a founder simultaneously sells 500,000 of her own already-held shares in the same prospectus, through an underwriter on a firm-commitment basis. If 100,000 of the combined 2,500,000 shares go unsold, whose shares are they, and what is the founder's own portion of the offering called?
How sure are you?
Correct: A. In a firm-commitment underwriting the underwriter buys the whole combined offering and bears the resale risk on whatever remains unsold; the founder's own shares, already outstanding before this sale, make her portion a secondary offering, while the company's new shares are its IPO.
B. Firm commitment puts unsold-share risk on the underwriter, not the issuer, and mislabels the founder's already-outstanding shares as an IPO rather than a secondary offering.
C. Firm commitment means the underwriter, not the founder, carries any unsold-share risk.
D. No automatic-cancellation mechanism exists in a firm-commitment deal; the underwriter owns what it does not resell.