An investor in a new issue should be somewhat skeptical when the new funds are being used to buy out old stockholders or to acquire property from existing stockholders.

Name: An investor in a new issue should be somewhat skeptical when the new funds are being used to buy out old stockholders or to acquire property from existing stockholders.
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Question

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An investor must research the company, the management, and the reasons for the new capitalization in making the investment decision.

An Investor in a New Issue Should Be Somewhat Skeptical