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:

Total Income

The sum of all earnings or revenue generated by an individual or entity from various sources before any deductions.

U.S. Income Distribution

The way in which total income is shared among the population of the United States.

Crowding Model

A theory or model that explains how public sector involvement can displace or reduce private sector activity in certain markets.

Occupational Segregation

The division of labor in which different groups of workers, often based on gender, ethnicity, or race, are systematically allocated different kinds of jobs.