A company has just done an IPO of 1 million shares. The explicit underwriter fees were 600.000 $. The offering price was 40$ per share; but immediately after the opening the price jumps to 44$.
a. What were the costs for the company for the IPO? Should the underpricing be considered?
b. What are the benefits for the underwriters? Do they benefit economically from the underpricing of the IPO?
