The company WayABC went public last year with its initial public offering price at $29, but...

The company WayABC went public last year with its initial public offering price at $29, but its first day trading price was $25. Did investors like its IPO, and why did the firm attempt to price its initial stocks?

Expert Solution

Investors did not like the initial public offering because the initial public offering was overpriced as they had issued their shares at a higher price but when the shares had settled in the first day trading, the price was lower so it can be said that investors did not like the initial public offering as it could not fetch premium in the market.

when the subscription price of any initial public offering is lower than the closing price of first day trading,then it can be said that investors has liked the initial public offering and they had listed the company at a premium in the market but in this case it can be seen that the company has been listed at a significant discount in the market and hence this initial public offering was not liked by the investor because it was overpriced so they had listed it at the the lower prices and they have not liked it.

Firm tried to price its initial stock at Higher price when it was issuing the shares to the company because it wanted to get maximum money for its existing shareholders in the initial public offering but those potential new investors who are investing into the company does not value the company so high and hence it was closing at a lower price on the first trading day.

jeff jeffy answered 2 years ago

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