What is the impact of underpricing a securities issue?
A)The underwriter loses while the issuing firm gains.
B)Both the underwriter and the outside investor gains while the issuing firm loses.
C)The outside investor loses while the issuing firm gains.
D)Both the underwriter and the outside investor loses while the issuing firm gains.

Question

Quizplus · Accepted Answer

Underpricing a securities issue means selling the securities at a price lower than the market value, which benefits the underwriter and outside investors who can buy at a lower price and potentially sell at a higher market price, while the issuing firm loses potential capital.

What Is the Impact of Underpricing a Securities Issue