The Offer Price of Shares in an IPO Is Generally

question 44

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

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Definitions:

Noncompliance

Refers to the failure to act according to set rules, standards, or laws.

Accounting-Based Incentives

Accounting-Based Incentives are rewards given to managers or employees based on reaching specific financial performance targets.

Executive Compensation

This refers to the financial payments and other non-monetary benefits provided to high-level management and executives in a company, including salaries, bonuses, stock options, and other perks.

Shareholder Value

The financial worth delivered to shareholders, typically measured by the increase in share price and dividends paid over time.