Question

Which of the following statements is NOT CORRECT?

	a.	The stock of publicly owned companies must generally be registered with and reported to a regulatory agency such as the SEC.
	b.	It is possible for a firm to go public and yet not raise any additional new capital for the firm itself.
	c.	"Going public" establishes a firm's true intrinsic value and ensures that a liquid market will always exist for the firm's shares.
	d.	When a corporation's shares are owned by a few individuals, we say that the firm is "closely, or privately, held."
	e.	When stock in a closely held corporation is offered to the public for the first time, the transaction is called "going public, or an IPO," and the market for such stock is called the new issue or IPO market.

Answer 1

c."Going public" establishes a firm's true intrinsic value and ensures that a liquid market will always exist for the firm's shares.

working.

When a firm goes public, its shares will be listed in a stock exchange, in case the firm's shares gain huge demand, then the price of its shares will go up exponentially, which may not reflect the true intrinsic value of the stock.

So it cannot be said that going public will establish a firm's true intrinsic value.

This is despite the fact that liquid market does exist for firm's shares after going public.

The following options are correct;

The stock of publicly owned companies must generally be registered with and reported to a regulatory agency such as the SEC.

It is possible for a firm to go public and yet not raise any additional new capital for the firm itself.

When a corporation's shares are owned by a few individuals, we say that the firm is "closely, or privately, held."