Public offerings of common stock


In the UK, initial public offerings of common stock are usually sold by an offer for sale. Mr. Beam has observed that on average these stocks are under-priced by about 9% and for some years has followed a policy of applying for a constant proportion of each issue. He is therefore disappointed and puzzled to find that this policy has not resulted in a profit. Explain to him why this is so.

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Finance Basics: Public offerings of common stock
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