Question

On average, IPOs appear to be underpriced. Therefore, for a fund manager, consistently trading on IPO...

On average, IPOs appear to be underpriced. Therefore, for a fund manager, consistently trading on IPO stocks is a valid investment strategy.

a.No answer text provided.

b.TRUE

c.No answer text provided.

d.FALSE

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Answer #1

The Correct Option is "D" - False

Proper research must be done by any Fund manager before entering into an IPO. There are several IPOs which has fallen by huge percentage within few days of listing. All the companies that go public doesn't turn out to be successful. So though investing in Good IPOs is a good strategy, but consistently investing in IPO is not good. As market plays an important factor in the success of an IPO. The fund manger should consider all factors before investing. After IPO the company becomes public. So there is Agent principal dilemma. Running a public company is costly, so all these factors should be considered before investing.

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