Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter 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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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.
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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.)
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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
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
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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