EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103164535
Author: DeMarzo
Publisher: PEARSON
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Question
Chapter 23, Problem 14P
Summary Introduction
To determine: The initial return of the first day IPO trading; who was benefited and lost from this underpricing and state its reason.
Introduction: When a company sells its share publically in an open market for the first time, it is known as initial public offering (IPO).
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Students have asked these similar questions
Publishing recently completed its IPO. The stock was offered at
$14.76
per share. On the first day of trading, the stock closed at
$18.33
per share.
a. What was the initial return on
Felton?
b. Who benefited from this underpricing? Who lost, and why?
Margoles Publishing recently completed its IPO. The stock was offered at $14.00 per share. On the first day of trading, the stock closed at $19.00 per share.
a. What was the initial return on Margoles?
b. Who benefited from this underpricing? Who lost, and why?
a. What was the initial return on Margoles?
The initial return was 1%. (Round to one decimal place.)
b. Who benefited from this underpricing? (Select the best choice below.)
OA. Owners of other shares outstanding (not part of the IPO) and underwriters.
O B. The company and underwriters.
O C. Investors who bought shares at the IPO price of $14.00/share and investment banks (indirectly from future business)
O D. The company and owners of other shares outstanding (not part of the IPO).
Who lost? (Select the best choice below.)
0 A. Owners of other shares outstanding (part of the IPO)
O B. Owners of other shares outstanding (not part of the IPO)
O C. Both of the above.
0 D. Investors who bought shares at the IPO price of…
A sophisticated investor, B. Graham, sold 250 shares short of Amwell, Inc. at $31 a share. The price of the stock subsequently fell to $26 before rising to $46 at which time Graham covered the position (that is, closed the short position). What was the percentage gain or loss on this investment? Use a minus sign to enter the amount as a negative value. Round your answer to two decimal places.
Chapter 23 Solutions
EBK CORPORATE FINANCE
Ch. 23.1 - Prob. 1CCCh. 23.1 - Prob. 2CCCh. 23.2 - Prob. 1CCCh. 23.2 - Prob. 2CCCh. 23.3 - List and discuss four characteristics about IPOs...Ch. 23.3 - Prob. 2CCCh. 23.4 - Prob. 1CCCh. 23.4 - What is the average stock price reaction to an...Ch. 23 - Prob. 1PCh. 23 - What are the advantages and the disadvantages to a...
Ch. 23 - Prob. 3PCh. 23 - Suppose venture capital firm GSB partners raised...Ch. 23 - Prob. 5PCh. 23 - Prob. 6PCh. 23 - Prob. 7PCh. 23 - Prob. 8PCh. 23 - Prob. 9PCh. 23 - Prob. 10PCh. 23 - Prob. 11PCh. 23 - Prob. 12PCh. 23 - What is IPO underpricing? If you decide to try to...Ch. 23 - Prob. 14PCh. 23 - Prob. 15PCh. 23 - Prob. 16PCh. 23 - Prob. 17PCh. 23 - Prob. 18PCh. 23 - Prob. 19PCh. 23 - Prob. 20P
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