Which of the Following Statements Regarding Firm Commitment IPOs Is

question 35

Multiple Choice

Which of the following statements regarding firm commitment IPOs is FALSE?

• A) The underwriter guarantees that it will sell all of the issue at the offer price.
• B) It is the most common underwriting arrangement.
• C) The underwriter purchases the entire issue (at the offer price) and then resells it at a slightly higher price to interested investors.
• D) If the entire issue does not sell out, the remaining shares must be sold at a lower price and the underwriter must take the loss.

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Definitions:

Absorbed Firm

A company that has been merged into or acquired by another company, ceasing to exist as an independent entity.

Proxy Contest

A struggle for control of a company, wherein competing parties seek to secure the votes of shareholders through proxy solicitation.

Shareholder Votes

The mechanism by which shareholders express their opinions or make decisions on corporate matters, typically exercised at annual meetings.

Equity Ownership

Refers to the portion of a company's capital that is owned by its shareholders, representing a claim on the company's assets and earnings.