Understanding IPOs

What is one advantage of a company going public?

• Increased reporting requirements

• Reduced shareholder profits

• Increased debt

• Raising capital without increasing debt

What is the role of an investment bank in the IPO process?

• To buy all the shares

• To eliminate all risks associated with the IPO

• To set the price of shares and underwrite the offering

• To manage the company's daily operations

What document is developed to detail the specifics of an IPO offering?

• A business plan

• A financial statement

• A marketing brochure

• A prospectus

Why might it be difficult for a retail investor to buy shares at the offering price?

• Retail investors must wait for a year after the IPO

• Shares are only available to institutional investors initially

• Retail investors are not allowed to buy shares

• The stock exchange does not permit retail investors

What is a common risk associated with investing in IPOs?

• Lack of previous trading history

• Guaranteed profit

• Unlimited company information

• Stable stock prices