Question

If FLR offered 100,000 shares of stock in its IPO but only received payment for 79,500 shares, the firm most likely had a ________ offering.

Dutch auction. Confirmed. Standby. Firm commitment Best efforts.

Answer 1

Correct answer is Standby offering.

Standby offering is type of agreement to sell shares in an initial public offering (IPO) in which the underwriting investment bank agrees to purchase whatever shares remain after it has sold all of the shares it can to the public.

Here, when the firm has sold shares to public and all the shares are not subscribed by public, remaining shares will be purchased by underwrites who will charge some commission for their service.

Dutch aunction is incorrect answer as in this the price is reduced until a buyer is found, here the firm has already offered shares to public.

All the shares are not subscribed therefore it is not a confirmed offering either.

It is not Firm commitment Best efforts either as in this the underwriters buys IPOs or initial public offerings to resell to the public to gain a profit. They agrees to give his or her highest personal effort to sell as much as possible of an IPO or other securities offering.

Hope it helps.!