Which of the Following Statements Is FALSE

question 91

Multiple Choice

Which of the following statements is FALSE?

• A) Once the issue price (or offer price) is set, underwriters may invoke another mechanism to protect themselves against a loss-the over-allotment allocation.
• B) A "road trip" is where senior management and the lead underwriters travel around the country (and sometimes around the world) promoting the company and explaining their rationale for the offer price to the underwriters' largest customers-mainly institutional investors such as mutual funds and pension funds.
• C) Before an IPO, the company prepares the final registration statement and final prospectus containing all the details of the IPO, including the number of shares offered and the offer price.
• D) Before the offer price is set, the underwriters work closely with the company to come up with a price range that they believe provides a reasonable valuation for the firm.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuing company, which does not necessarily match the market value.

Treasury Stock

Shares of a company's own stock that it has reacquired but has not retired, which can be resold or used for other corporate purposes.

Paid-in Capital

The amount of money that shareholders have invested in the company through the purchase of its stock, over and above the par value of the shares.

Par Value

The face value of a bond or stock as stated in the corporate charter, which is the minimum amount the security can be sold for upon its initial offering.