Question: 19Multiple Answer2 points70(Multiple Answer Q9 of 10) Initial Public Offerings (IPOs) have the potential to allow companies to raise large amounts of money. However, underpricing

19Multiple Answer2 points70(Multiple Answer Q9 of 10) Initial Public Offerings (IPOs) have the potential to allow companies to raise large amounts of money. However, underpricing is pervasive with IPOs.What are some potential reasons for IPO underpricing? Litigation Risk: The company may be eventually sued if the price is set too high Advertising A huge increase in price on the first day of trading brings a lot of positive attention to the company Adverse Selection: the potential that the company may be bad means that the price needs to be set lower to attract investors

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