QUESTION $6$

A$.$ Suppose you own stock in a company. The current price per share is $$25.$ Another company has just announced that it wants to buy your company and will pay $$35$ per share to acquire all the outstanding stock. Your company's management immediately begins fighting off this hostile bid. Is management acting in the shareholders' best interests? Why or why not? $(3$ marks$)$

B$.$ Why do you think shareholders from target companies enjoy an average gain when acquired, while acquiring shareholders often do not gain anything? $(4$marks$)$

c$.$ Your robotic automation startup, Kela Controls, has raised capital as follows:

$\backslash$table$[[$Funding Round,Pre$-$Money,Post$-$Money$],[$Series A$,$$$8$ million,$$12$ million$],[$Series B$,$$$25$ million,$$40$ million$],[$Series C$,$$$100$ million,$$150$ million$]]$

i$.$ How much did Kela raise in each round? $(2$ marks$)$

ii$.$ Assuming no other securities were issued, what fraction of the firm's shares were held by common shareholders $($founders and employees$)$ after each round? $(2$ marks$)$

iii. What is the distribution of ownership across each security after the Series C financing? $(2$marks$)$

D$.$ What is the typical stock price reaction to an SEO? $(3$marks$)$

E$.$ Why should a financial manager be concerned about underpricing in an SEO how can this problem be minimized through a right issue? $(4$ marks$)$