Jeff's Poker Supplies Inc. (JFPS) would like to offer shares to the public for the first time. According to the approved and final prospectus, 1 million shares are being offered for $10 per share after the underwriting discount, for a total of $10 million.
a. What do we call the first public sale of a company's stock, and in which type of market (primary or secondary) does it occur?
b. Who initially purchases all 1 million shares, and what is that process called?
c. Suppose that JFPS opens at $19 per share on its first day. Does Jeff's Poker Supplies earn $19 million, or just the original $10 million? Explain.