A technology company is conducting its IPO. The preliminary prospectus has a price range of $18-$21 per share. After the roadshow, demand is significantly higher than expected. The underwriters want to price the deal at $25 per share. What must occur?

AThe deal can be priced at $25 without any additional filings
BA new registration statement must be filed and a new cooling-off period must begin
CAn amended registration statement must be filed reflecting the new price range, and investors must be given the opportunity to reconfirm their orders✓ Correct answer
DThe underwriters must reduce the offering size to maintain the original price range

Explanation

Why C — An amended registration statement must be filed reflecting the new price range, and investors must be given the opportunity to reconfirm their orders

When the final offering price exceeds the range disclosed in the preliminary prospectus by more than 20%, an amendment to the registration statement is typically required under SEC rules. Investors who submitted indications of interest based on the original range must be given the opportunity to reconfirm or withdraw their orders at the new price. This protects investors from being committed to purchases at prices materially different from what they expected.

Turn it into reps

Reading one answer is not the same as being ready

Lucky the Banker is a free practice app with 477+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.

Practice Series 79 free Series 79 exam guide

Related Underwriting & New Financing questions