Question

Which one of the following statement(s) is NOT true?

		After firms go through the IPO process, the firm is subjected to more stringent disclosure rules
		Firms typically receive less proceeds than the IPO price
		On average, there is overpricing in the IPO market
		IPO is a process in which firms issue equity to the public for the first time

Answer 1

A firm post IPO undergoes more stringent disclosure rules as post IPO the firm's shares are not entirely privately held. Infact, post IPO the broader public is owner of a major (or maybe minor) part of those shares. As regulatory bodies are responsible of protetcing right of the this general public, firms with significant public share holding (post IPO basically) are subjected to stricter disclosure requirements.

Firms indeed receive less proceeds than the IPO price as the difference is a fees charged by the investment bankers who execute the IPO process.

On an averga IPOs are underpriced and not overpriced. This can be attributed to a number of reasons such as lack of public knowledge about the firm's business acumen, actual fair value of the stock, price at which the stock will actually trade, perceived lack of liquidity and many more such similar reasons.

IPO is indeed the process through which firms issue equity for the first time.

Hence, the correct option is (c)