Yes, you are correct. When investors feel confident of the market, they will usually pay a higher price for a stock.
No, please go back and read the last two pages. Investors become very reluctant to pay top dollar for a stock when the market is in a downturn
Yes, you are correct. When investors feel confident of the market, they will usually pay a higher price for a stock.
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| Lesson 5 Screen 11 | |
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IPO Goal The goal of the IPO is to raise as much capital as possible. So if everything isn’t right for your IPO, your investment banker could recommend waiting a while. Even very stable, profitable companies sometimes delay their IPOs if the market doesn’t appear to be conducive for a successful public offering. In 1999, Goldman Sachs decided to do an IPO after more than 100 years in business. Unfortunately, right before the IPO was scheduled to happen, there was an economic crisis that sharply reduced investor confidence and caused a downturn in financial markets. Suddenly, the $65 per share Goldman Sachs expected to earn in the IPO was reduced to less than $50 per share. At the last minute, Goldman Sachs decided to delay the public offering. The company waited nine months for the financial markets to improve and share prices to recover. When Goldman Sachs finally launched the IPO, their shares brought $70 each. You can see how a smart investment banker helped them raise millions of dollars more than they would have.
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True or False? When investors are feeling positive about the market, they are more willing to pay higher prices for shares of stock in an IPO. |
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