Question

Which of the following statements is INCORRECT? Select one: a. When stock in a closely held corporation is offered to the public for the first time, the transaction is called "going public or an IPO", and the market for such stock is the secondary market. b. The stock of publicly owned companies must generally be registered with and reported to a regulatory agency such as the SEC. c. When a corporation’s shares are owned by a few individuals, we say that the firm is "closely or privately held". d. Although "Going public" can provide a liquid market for a firm’s shares, it cannot guarantee a true intrinsic value in the market. e. It is possible for a firm to go public and yet not raise any additional new capital for the firm itself.

Answer 1

Answer:

a. When stock in a closely held corporation is offered to the public for the first time, the transaction is called "going public or an IPO", and the market for such stock is the secondary market.

Explanation:

When the stock of a company is issued for the first time as an Initial Public Offer, even if it is a closely held company, it is a primary market transaction.

A primary market transaction is the one which raises funds for the company, from the market. Whereas the secondary market transaction is the one, where already existing securities are dealt with.

Thus, since IPO is the first issue of securities to public it is a primary market transaction.