Question

For what reason would a company offer shares in an IPO that are priced below their intrinsic value

Select one:

a. to negotiate a lower underwriting fee.

b. to make the shares attractive to institutional investors.

c. all of these reasons are valid.

d. to make the shares attractive to new investors.

Answer 1

A company would offer shares in an IPO that are priced below their intrinsic value-

• To negotiate alower underwriting fee as it is a percentage of the capital raised
• To make the shares attractive to institutional investors and increase the subscription
• To make the shares attractive to new investors and increase the overall subscription by making the offer attractive

Hence the answer is-

C. All of these reasons are valid

Let me know in the comment section in case of any doubt.