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    Randy's Restaurant: raise $15M in new capital. Discuss equity market options.

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    (Mini Case) Randy's, a family-owned restaurant chain operating in Alabama, has grown to the point where expansion throughout the entire Southeast is feasible. The proposed expansion would require the firm to raise about $15 million in new capital. Because Randy's currently has a debt ratio of 50%, and also because the family members already have all their personal wealth invested in the company, the family would like to sell common stock to the public to raise the $15 million. However, the family does want to retain voting control. You have been asked to brief the family members on the issues involved by answering the following questions:

    a. What agencies regulate securities markets?

    b. How are start-up firms usually financed?

    c. Differentiate between a private placement and a public offering.

    d. Why would a company consider going public? What are some advantages and disadvantages?

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    Solution Preview

    a. What agencies regulate securities markets?
    The bodies that regulate the securities markets include NASD & the New York Stock Exchange as well as the SEC (Securities and Exchange Commission). The SEC also regulates the overseas market as well.

    b. How are start-up firms usually financed?
    There are various alternatives here. Traditional financing (bank ...

    Solution Summary

    The solution specifically addresses the regulatory questions and discusses the agencies involved. Several advantages and disadvantages of going public are briefly explained in the solution.