Question

The cost of under-pricing a company’s IPO is determined with reference to

Select one:

a. the offer price and the price at which underwriting has been arranged.

b. the offer price and the closing price on the first day of trading on the ASX.

c. the offer price and the opening price on the first day of trading on the ASX.

d. the opening and closing prices on the first day of trading on the ASX.

Answer 1

Initial public offer underpricing means that when the initial public offer is offered at a low rate than the closing price of the first day of the trading of the share.

when shares in a company are offered on the stock market for the very first time and these shares are offered at less than their intrinsic value which will be reflected on the closing price of the first day of trading.

it is not about difference between offer price and opening price for opening price and closing price so other options are false.

Correct answer is option( B)the offer price and the closing price on the first day of trading on the ASX.