Which of the following parties will likely benefit the most from the underpricing of a new common stock issue?

Question

Quizplus · Accepted Answer

The underpricing of a new common stock issue benefits new shareholders the most because they are able to purchase the stock at a lower price, making it more attractive and potentially increasing demand. Existing shareholders may benefit to some extent as the stock price may increase after the underpricing, but they already held shares before the underpriced offering. Corporate management may benefit indirectly from the positive effect on the stock price, but their benefit would be limited. The issuing firm may benefit in the short term, but the underpricing can signal to investors that the firm lacks knowledge of the market or is undervaluing its assets.

Which of the Following Parties Will Likely Benefit the Most