Which of the Following Is True If New Shares Are

Multiple Choice

Which of the following is true if new shares are sold at an offering price that is too low? (Assume a firm commitment offering.)

A) Underwriters suffer a financial loss because they are less likely to be able to sell all of the shares offered.
B) Markets in general suffer because this is a misallocation of scarce resources.
C) Investors in general suffer a financial loss because they purchase shares at a price less than their true value.
D) Investors in general suffer because the more underpriced offerings there are, the less likely additional IPOs will follow.
E) The shareholders of the issuing firm suffer an opportunity loss because shares were sold at less than their true value.