The Offer Price of Shares in an IPO Is Generally

question 27

Multiple Choice

The offer price of shares in an IPO is generally less than the price those shares sell for at the end of the first trading day.Which of the following parties suffer most from this situation?

• A)the buyers of shares after the initial offering
• B)the underwriters of the IPO
• C)the pre-IPO shareholders of the issuing firm
• D)the lead underwriter of the IPO
• E)the buyers of the shares at the end of the first trading day

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Definitions:

Accrued Revenues

Revenues for services performed but not yet received in cash or recorded.

Received

Typically refers to the acknowledgement of having gotten something, such as goods or payments, within a business context.

Recognized

In accounting, recognized refers to the formal acknowledgment in financial statements that a transaction or event has impacted the entity's financial position or performance.

Book Value

The net value of a company's assets as found on its balance sheet, and is calculated by subtracting liabilities from the value of assets.