IPO Price/Shares

When IBanks help sell shares of a company in an IPO...

How do they determine price per share?
How do they determine how many shares to be sold?
What are the risks of setting the IPO price too high?

Comments (3)

Nov 10, 2017
  1. Valuation (business fundamentals) and Demand (Marketability)
  2. How much capital the company wants to raise / amount of ownership willing to give up
  3. if the price is too high, not enough investors will subscribe to the issue and the underwriting company will be left with shares it either cannot sell or must sell at a reduced price, incurring a loss. Sometimes, when underwriters can't find enough investors to purchase IPO shares, they are forced to purchase the shares that could not be sold to the public aka "eating a stock"

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Nov 10, 2017

OK I understand 1 and 3 now, but for question 2...

Whats the difference between offering 1,000 shares at $20 vs offering 2,000 shares at $10 (for simplicity of numbers)? Because both equal $20,000

Nov 10, 2017

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