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19 Jul 2012, 14:22
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https://www.gmatpill.com/gmat-practice-t ... stion/1883
Can anyone tell me how it is Not supported for last one ?
It is clearly mentioned that investor sentiment and board prestige both showed a strong negative correlation with IPO pricing . So in second tab we can see that IPO price of Kengen is 11.90 which is much lower than First day closing price while IPO price of Scangroup is 10.45 and Eveready is 9.50 which is not much lower than First day closing price .
Am I wrong in interpretation . If yes then correct me !!
Thanks a lot !!
Can anyone tell me how it is Not supported for last one ?
It is clearly mentioned that investor sentiment and board prestige both showed a strong negative correlation with IPO pricing . So in second tab we can see that IPO price of Kengen is 11.90 which is much lower than First day closing price while IPO price of Scangroup is 10.45 and Eveready is 9.50 which is not much lower than First day closing price .
Am I wrong in interpretation . If yes then correct me !!
Thanks a lot !!
macjas
Joined: 09 May 2012
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26 Jul 2012, 23:13
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C)When their IPO prices were set, investor sentiment was likely more favorable toward Kengen than toward Scangroup or Eveready.
@debabrata44: You need to consider the closing price of the shares to gauge investor sentiment in the first place. Consider this, when the share prices were set by the firms, we don't know how investors are going to react to the shares. So after a day's worth of trading, the change in share price would reflect the demand of the shares. Therefore, when the prices were set at say, the beginning of the day, we cannot say conclusively whether investor sentiment would be positive or negative for any of the firms.
@debabrata44: You need to consider the closing price of the shares to gauge investor sentiment in the first place. Consider this, when the share prices were set by the firms, we don't know how investors are going to react to the shares. So after a day's worth of trading, the change in share price would reflect the demand of the shares. Therefore, when the prices were set at say, the beginning of the day, we cannot say conclusively whether investor sentiment would be positive or negative for any of the firms.
29 Jul 2012, 01:59
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debabrata44
I think you are interpreting this wrong..
Two things to take care for understanding investor sentiment is Closing Price and the Underpricing.
If the closing price is making up for the Underpricing, then the share is enjoying a investor sentiment.
The data says the Scangroup is 43.54% underpriced and the closing value is 15 from 10.4 implies almost 33 - 34% makeup for the underpricing of share,
where as for Kengen also, it is 30% as where the shares are 236% underpriced .
which share has investor sentiment - clearly Scangroup !
