Question

IPOs are usually under-priced because Select one: a. investors have misjudged the riskiness of the company....

IPOs are usually under-priced because

Select one:

a. investors have misjudged the riskiness of the company.

b. all of these are true.

c. the bank underwriting the issue has recommended a lower offer price.

d. the company has misjudged the level of investors’ interest.

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Answer #1

The correct option is C

The Under pricing refers to a situation when the Trading price of the security on the first date of issue is more than the set IPO Price, then it is called as Under pricing.

The Underpricing is usually done by the company so that the investors can take interest and the risk in the company and to provide initial short term gain and it may be done because the Set price of the initial price offer by the underwriter is recommended lower.

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