Why is it so difficult to determine the appropriate price for an IPO? Who do you think has the most input: the issuing firm, the underwriter, or investors? Explain.

Answer:

Initial Public Offer (IPO) means selling securities to the public in the primary market. This is when an unlisted company issues a new issue of securities or when it proposes to sell its existing securities, or when it is first offered to the public.

Since the price of the stock is determined by supply and demand and the shares are first issued to the public, supply and demand cannot be determined so it is difficult to determine the price.

The issuer is a corporation, government, corporation, or investment trust that sells securities such as shares and bonds to investors as part of a public offering or as a private placement.

An underwriter is a bank or other financial institution that buys all the shares that are not sold in the IPO.

An investor is a person who invests in securities with the promise of future financial returns. Therefore, all three parties play an important role in determining demand and supply, so these three inputs are important.