Asked by Keshawn Johnson on May 11, 2024
Verified
Which of the following is NOT included in flotation costs of an IPO?
A) underwriting fees paid to underwriters
B) direct issuing costs
C) oversubscription option
D) overpricing
Flotation Costs
Expenses incurred by a company in issuing new stocks or bonds, including underwriting costs, legal fees, and registration fees.
Oversubscription Option
A clause in an offering agreement that allows the issuer to sell more shares than originally planned if the demand exceeds expectations.
- Acquire knowledge of the economic outlays and approaches related to Initial Public Offerings, focusing on flotation expenses and the roles of underwriters.
Verified Answer
TK
Tushar KapatelMay 16, 2024
Final Answer :
D
Explanation :
Overpricing is not a part of flotation costs. Flotation costs are the costs incurred by a company when it issues new securities to the public, such as underwriting fees paid to underwriters and direct issuing costs. Oversubscription option refers to the option to issue additional shares to meet excess demand and is also a part of flotation costs.
Learning Objectives
- Acquire knowledge of the economic outlays and approaches related to Initial Public Offerings, focusing on flotation expenses and the roles of underwriters.
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