If the Managers of a Firm,which Issues IPO,have Better Information

question 4

Multiple Choice

If the managers of a firm,which issues IPO,have better information than investors:

• A)the investors who are allocated shares in the IPO could be subject to the winner's curse.
• B)it is likely that the initial offering will be underpriced to make investors feel better about the secondary issue.
• C)the investors will have an incentive to distort their true opinions of an initial public offering to ensure that subsequent issues are accurately priced.
• D)then the offer price will be on par with the expected closing price on the first trading day.

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Definitions:

Monopolization

The process or state where a single company or entity gains exclusive control over a particular market or industry.

Natural Monopolies

A market dominated by a single seller because of high entry barriers or because the service or product is most efficiently supplied by a single provider.

Government Takeover

An acquisition where a government assumes control over a company or industry, often to stabilize the sector or protect national interests.

Perfectly Competitive

A market structure characterized by many buyers and sellers, homogeneous products, and no barriers to entry or exit.