Question

Offered Price $ 6.00

The IPO was unconventional

Question # 00081455
Subject: Economics
Topic: Financial Markets
Due on: 08/10/2015
Posted On: 07/11/2015 04:58 AM

Rating:
4.1/5
Expert tutors with experiences and qualities
Posted By
Best Tutors for school students, college students
Questions:
108805
Tutorials:
110428
Feedback Score:

Purchase it
Report this Question as Inappropriate
Question
On August 19, 2004, the Internet search firm Google went public, at an offer price of $85 per
share. The IPO was unconventional in that Google used an auction to determine its offer price
and sell shares to investors. In this respect, underwriters did not allocate shares to clients.
Instead investors registered to participate in the auction, and indicated the maximum price they
were willing to pay, along with the number of shares they wished to purchase. If a registered
investors maximum price was at least the offer price, the investor paid the offer price, not their
maximum price. Google had established its initial file range for the offer price to be $108 to $135
a share. However, based on the interest shown by investors in registering for the auction, the
firms executives reduced the range to between $85 and $95. On its first day, Google stock
opened at $100 per share.
A. Were investors, who purchased Google shares at $100 irrational, in that they could have paid
$85 the day before? Or might there be some other explanation for the 17 percent jump in price
when the stock began to trade publicly? Discuss.
B. Today, Google share price is considerably higher than even the most optimistic forecasters at
the time of the IPO. Are current investors being irrational?
Tutorials for this Question
Available for
$ 6.00

The IPO was unconventional

Tutorial # 00076122
Posted On: 07/11/2015 04:58 AM
Posted By:
Best Tutors for school students, college students kimwood
Expert tutors with experiences and qualities
Questions:
108805
Tutorials:
110428
Feedback Score:
Report this Tutorial as Inappropriate
Tutorial Preview … purchased Google shares …
Attachments
soln.zip (16.24 KB)
Purchase this Tutorial @ $6.00 *
* - Additional Paypal / Transaction Handling Fee (3.9% of Tutorial price + $0.30) applicable
List of Main Subjects
Accounting
Anthropology
Architecture
Art
Asian Studies
Astronomy
Biology
Business
Chemistry
Communications
Computer Science
Economics
Education
Engineering
English
Finance
Foreign Languages
Gender Studies
General Questions
Geography
Geology
Health Care
History
Kindergarten
Law
Linguistics
Literary Studies
Marketing
Mathematics
Music
Nursing
Performing Arts
Philosophy
Physics
Political Science
Psychology
Religious Studies
Sociology
Statistics
Urban Planning and Policy
View all subjects...
Loading...