IPO Underpricing Carlyle plc and Mullan plc have both announced IPOs at 40 per share. One of

Question:

IPO Underpricing Carlyle plc and Mullan plc have both announced IPOs at £40 per share. One of these is undervalued by £11, and the other is overvalued by £6, but you have no way of knowing which is which. You plan on buying 1,000 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. If you could get 1,000 shares in Carlyle and 1,000 shares in Mullan, what would your profit be? What profit do you actually expect? What principle have you illustrated?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Fundamentals Of Corporate Finance

ISBN: 9780077178239

3rd Edition

Authors: David Hillier, Iain Clacher, Stephen A. Ross

Question Posted: