Most IPOs, however, are underpriced, meaning that the company is priced at a level that reflects a lower net worth than the company actually has. The result of this is that the IPO attracts more investors (Pons-Sanz, 2005). While the issuer does not receive fair value for the equity stake it is selling, the issuer does benefit from underpricing an IPO in that it virtually guarantees a fully-subscribed issue. An overpriced IPO, by contrast, can yield more investment capital for the issuer but bears greater risk that the issue will not be fully subscribed. The ideal price of the IPO strikes a balance that allows the firm to generate the greatest amount of capital. The Winchester Resources shares were issued at 20.5 cents per share. There has been very low volume on the issue, and Winchester currently sits at issue price (ASX.com, 2009). Therefore, it is reasonable to conclude that Winchester Resources' shares were priced correctly at IPO. The shares rose briefly, but that rise was quickly reversed. In an efficient market, prices trend towards equilibrium. That has happened...
It should be noted, however, that the low trading volume on Winchester shares indicates that the market for these shares is not yet sufficiently liquid as to give a strong, reliable indication one way or the other with respect to the nature of the company's IPO price. The information we have at this point indicates correct pricing, but the low volumes preclude the ability to make a definitive determination of such.
This is done primarily to attract buyers to the offering. By selling the shares below value, it is believed that any rational investor would be enticed. Rational investors would know that when full information about the company comes to light, the market price of the shares will move to the true, rational value point. Thus, their investment during the IPO process would virtually guarantee them a profit. An overpriced offering
"Much of Sumatra and Java had already become Islamized (the earliest known Muslim grave on Java dates from 1419) and the local people & #8230;were… sensitive to the strange ways of the European infidels" (Winchester 34). Therefore, there is little evidence to dispute the fact that the fundamentalist Islamic beliefs that reared themselves in the form of an organized attack after the explosion of Krakoa was deeply entrenched into
Krakatoa is a volcanic island in Indonesia between Java and Sumatra. On August 26th and 27th, 1883, the volcanic mountain Krakatoa erupted killing more than 37,000 people. Thousands more were injured in the eruption and the tidal waves that followed. As far away as 3,000 miles away people were able to hear the explosion. An incredible 2/3 of the island of Krakatoa was destroyed in the blast. The eruption of
Post-World War II Japan: A Nation in Transition Devastated by the Allies in World War II, Japan has emerged as one of the world's most economically and technologically advanced societies today. Some observers have suggested that the "Japanese miracle" was the result of a collusion between the government and industry to prosecute economic growth through a series of subsidies and favorable business climates, while others maintain this explosive growth was due
In suburban areas, on the other hand, the economic opportunities are diverse and the population is less dense. Here parents are motivated to educate their child and the child gets higher individual attention from the teachers than those in the urban areas where population density is very high (Broomhall and Johnson, 1994; and Hanson and Ginsburg, 1988). Since educational aspirations of parents, students and teachers differ by population density
Wearin' of the Green An Irish-American's Journey Margaret-Mary clutched her daughter's tiny hand. Watched with pride as the five-year-old waved the little Irish Flag in her other hand. It was a cold, blustery day, but then it always was on St. Patrick's Day. Yet as Margaret-Mary braved the wind and the crowds, she didn't feel the least bit cold. Never did, but especially not today. It wasn't just that today she
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now