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IPO underpricing is a wealth transfer From existing shareholders to new shareholders From new shareholders to...

IPO underpricing is a wealth transfer

From existing shareholders to new shareholders

From new shareholders to existing shareholders

From bondholders to shareholders

From shareholders to bondholders
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Answer #1

Initial public offer underpricing is a type of wealth transfer from the existing shareholders of the company to the new share holders of the company because in underpricing, the existing shareholders of the company will be offered the lesser price for their stocks and new share holders will be gaining the stock at cheaper price and those will be value gains.

Other statements are false because it is not involving bondholders.

Correct answer will be option (A) from existing shareholders to new share holders.

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