Series 79 practice questionmediumIPO Process
What is the typical sequence of events on the pricing date of an IPO?
- AShares begin trading, then the price is set, then the underwriting agreement is signed
- BThe underwriting agreement is signed, the final price is determined, and the registration statement is declared effective
- CThe final price is determined, the underwriting agreement is executed, and the SEC declares the registration statement effective✓ Correct answer
- DThe SEC declares the registration effective, then the roadshow begins, then the price is set
Explanation
Why C — The final price is determined, the underwriting agreement is executed, and the SEC declares the registration statement effective
On pricing night, the final offering price is determined through the book-building process, the underwriting agreement is then executed between the issuer and underwriters, and a pricing amendment is filed with the SEC to reflect the final terms. The registration statement is typically declared effective by the SEC through a request for acceleration. Trading begins the following morning, and the deal closes (with payment and delivery of shares) typically two business days later.
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