Which of the Following Is Not True Regarding Overallotment Options

question 38

Multiple Choice

Which of the following is not true regarding overallotment options?

• A) Overallotment options are rarely used in IPOs today.
• B) An overallotment option allows the lead underwriter to allocate an additional 15 percent of the shares of a firm engaging in an IPO.
• C) The option allows the lead underwriter to purchase additional shares at the offer price.
• D) The lead underwriter may use the shares from an overallotment option to help stabilize the stock price in the days after the IPO.

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