Which one of the following can be assumed when the SEC approves an IPO registration?
A)The securities offering will provide value to the shareholders.
B)The issuer is financially sound.
C)The issuer will remain solvent.
D)All rules have been followed to allow for full disclosure of information.
E)The stock price is set at a level which will allow shareholders to earn a positive rate of return.

Question

Quizplus · Accepted Answer

When the SEC approves an IPO registration, it means that the issuer has followed all rules and guidelines for full disclosure of information related to the offering. This assures investors that they have access to all the relevant information needed to make an informed investment decision. However, approval of an IPO registration does not necessarily imply anything about the financial soundness of the issuer, whether the offering will provide value to shareholders, or whether the issuer will remain solvent. It also does not imply anything about the stock price being set at a level that will allow shareholders to earn a positive rate of return.

Which One of the Following Can Be Assumed When the SEC