Question

The term "equity carve-out" refers to the situation where a firm's managers give themselves the right to purchase new stock at a price far below the going market price. Since this dilutes the value of the public stockholders, it "carves out" some of their value.

Select one:

a. True

b. False

Answer 1

Answer:

b. False

Explanation:

Equity carve- out is an investment strategy executed by corporations. It involves a company selling minority shares through an Initial Public Offerring (IPO) to the external investors with an objective of partially divesting their  subsidiaries or business units . This way, the management would retain majority stake and control over the parent company and sell limited shares of its division to the public.