If,for an IPO,market prices have fallen,then underwriters with an out-clause that gives a level of a specified price index that the index cannot fall below,then:

Question

Quizplus · Accepted Answer

If the market prices have fallen, the underwriters may not want to purchase the unsold shares at the original offering price. The out-clause would allow them to be released from their obligations without incurring any penalties. This would protect the underwriters from market volatility and allow them to avoid potential losses.

If,for an IPO,market Prices Have Fallen,then Underwriters with an Out-Clause