Who Bears the Bulk of the Cost of Underpricing an IPO

question 73

Multiple Choice

Who bears the bulk of the cost of underpricing an IPO?

• A) The underwriters
• B) The investors who purchase IPO shares
• C) All of the after-IPO shareholders
• D) The pre-IPO shareholders

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Definitions:

Nonemployee Agent

A nonemployee agent typically contracts with the principal to produce a result and determines for himself or herself how that result will be accomplished. Also called an independent contractor.

Independent Contractor

An individual or entity contracted to perform work for another entity as a non-employee, often with greater control over how the work is completed.

Restatement (Third)

A reference to the third update of the Restatements of the Law, which are collections of common law judicial decisions in the United States, organized by subject.

Agency Coupled

A legal relationship where an agent has an irrevocable right to represent the principal due to an interest the agent has in the subject of the agency.