when a company goes public, what determines the price of their stock?

Answer 1

A lot of time and thought goes into the determination of the price in an IPO. It is determined by the issuing corporation with the advice of the underwriter. Some aspects they will look at are the: P/E ratio, market condition in similar securities (and interest in your company), spread the underwriting syndicate is willing to accept, capital the company wishes to raise, debt ratio, etc.

The list can go on for a long while, but that should cover most of the essentials. Needless to say, a lot of effort and calculations go into it.

Answer 2

The stock price of a company is calculated when a company goes public, an event called an initial public offering (IPO). This is when a company will pay an investment bank a lot of money to use very complex formulas and valuation techniques to derive a company's value by determining how many shares will be offered to the public and at what price.

Answer 3

Wrong, wrong and wrong.

The investment bankers set an expected range for the IPO, but the price of the stock is always determined by the demand for it. As more investors want shares, the prices naturally rises. As price rises, fewer investors want shares.

That's why sometimes an IPO will be oversubscribed and sometimes the company will withdraw it.

Answer 4

First, the underwriter prepares a valuation opinion. Then, the underwriter's salespeople get on the phone and start collecting commitments. If the total of commitments exceeds the amount of shares to be sold in the IPO, the price is revised upwards. If the total of commitments is below the amount of shares to be sold in the IPO, the price is revised downward.

Answer 5

The overall value of the company divided by how many shares the company is selling for the IPO.

Answer 6

How popular their products are, how much they sell.