Stocks speculation or rapid sale of stocks for profit can bring considerable benefits to investors who distribute stocks at the issuance price. However, too low pricing will cause the issuer to lose potential capital. An extreme example is the fanaticism ” of the Internet age in the late 1990s. Underwritten by Bear Stearns on November 13, 1998, the IPO pricing was $9 per share. On the day of the opening, the stock price rose rapidly by 1,000%, reaching a high of $97.
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The sell-off pressure brought about by the organization’s sell-off eventually led latest database to the stock’s fall, with a closing price of $63 that day. Although the company did raise about US$10,000 from this issue, it is estimated that based on the level of demand and transaction volume of this issue, they may have more than US$200 million left. The danger of overpricing is also an important consideration. If the stock is issued to the public at a price higher than the market, the underwriter may have difficulty fulfilling its commitment to sell the stock.
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Even if they sell all issued stocks, the value of stocks may fall on the first day of the transaction. If so, the stock may lose its marketability, thereby losing more value. This may cause losses to investors, many of whom are the most favored customers of underwriters. Perhaps the most famous example is 2012. Therefore, underwriters Business Lead will consider many factors when pricing IPO and try to reach a sufficiently low issuance price to stimulate people’s interest in stocks, but high enough to raise sufficient funds for the company.