Asked by Diana Morrissey on May 28, 2024
Verified
Which of the following best defines the term initial public offering (IPO) ?
A) Loans, usually long term in nature, provided directly by a limited number of investors.
B) Allows shareholders to purchase unsubscribed shares in a rights offering at the subscription price.
C) An underwriting provision that permits syndicate members to purchase additional shares at the original offering price.
D) The part of the underwriting contract that specifies how long insiders must wait after an IPO before they can sell stock.
E) A company's first equity issue made available to the public. Also an unseasoned new issue.
Initial Public Offering (IPO)
The first sale of a company's stock to the public, transitioning the company from private to public to raise equity capital.
Rights Offering
A financial mechanism allowing current shareholders to purchase additional shares directly from the company at a specified price before the shares are offered to the public.
Underwriting Provision
A clause or condition included in financial agreements, often in insurance or security underwriting, detailing specific obligations or requirements.
- Describe the process and characteristics of an initial public offering (IPO).
Verified Answer
DD
Danny DaoudJun 03, 2024
Final Answer :
E
Explanation :
An initial public offering (IPO) refers to the process where a private company offers shares of stock to the public for the first time, transitioning into a publicly traded company. This allows the company to raise capital from public investors. Choices A, B, C, and D describe other financial concepts and mechanisms not directly related to the definition of an IPO.
Learning Objectives
- Describe the process and characteristics of an initial public offering (IPO).