FIN 401 Lecture Notes - Lecture 7: Corporate Bond, Private Placement, Dutch Auction
Document Summary
Initial public offering (ipo: elli(cid:374)g so(cid:373)e of a (cid:272)o(cid:373)pa(cid:374)y"s sto(cid:272)k to the pu(cid:271)li(cid:272) for the first ti(cid:373)e, letting the stock trade in public markets, company is turned from a privately owned company to a publically traded company. Ipo underwriters: formulating method used to issue securities, pricing the securities, sell the securities, someti(cid:373)es for(cid:373) a group (cid:272)alled a (cid:862)sy(cid:374)di(cid:272)ate(cid:863) to share the risk a(cid:374)d profits of issui(cid:374)g the securities. The cost of ipo: direct expenses spread (cid:894)u(cid:374)der(cid:449)riters" fee(cid:895), legal fees, fili(cid:374)g fees. Indirect expenses underpricing (the issued price of a stock is below the closing price on the first day of tradi(cid:374)g(cid:895); (cid:272)auses the issuer to (cid:862)lea(cid:448)e (cid:373)o(cid:374)ey o(cid:374) the ta(cid:271)le(cid:863) Investors who bought shares from underwriters pay market price for shares: underwriters risk of an unsuccessful ipo is reduced because of low offerings. Initial owners bear cost sell the stock of firm for less than they could get in the aftermarket.