Which of the following statements concerning common stock and the investment banking process is NOT CORRECT?
A) The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue.
B) If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the primary market.
C) Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm.
D) Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with management's performance, an outside group may ask the stockholders to vote for it in an effort to take control of the business. This action is called a tender offer.

Question

Quizplus · Accepted Answer

The incorrect statement is D because it inaccurately describes a tender offer. A tender offer involves an outside party directly offering to buy the shares of the company's shareholders at a specified price, typically at a premium to the market price, in an effort to gain control of the company. It is not merely asking stockholders to vote for a new management team but is a financial proposition to purchase shares directly from the shareholders.

Which of the Following Statements Concerning Common Stock and the Investment