Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Which of the following is/are potential explanations for IPO underpricing? All explanations All explanations except IPO underpricing is a way to reward the venture capitalists
Which of the following is/are potential explanations for IPO underpricing? All explanations All explanations except "IPO underpricing is a way to reward the venture capitalists who provided the firm with its initial funding, and decided to take the firm public All explanations except "Underpricing makes IPO shares easier to sell, which reduces underwriters' risk of being stuck with unsold shares" Underpricing makes IPO shares easier to sell, which reduces underwriters' risk of being stuck with unsold shares. O IPO underpricing is a way to reward the venture capitalists who provided the firm with its initial funding, and decided to take the firm public. IPO underpricing is a way for underwriters to keep their institutional investor clientele happy, and to compensate informed investors for revealing their true view of the issuing company's value. Underpricing IPO shares on average keeps smaller and less informed investors interested in purchasing IPO shares. Without systematic underpricing, these investors might fear the winner's curse
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started