CFA Level I · CFA Level I Exam · Organizational Forms, Corporate Issuer Features, and Ownership
A private company's owners are considering a public listing. Which outcome is most likely after the listing?
After listing, the firm most likely obtains a market-determined share price, which it can use as currency for acquisitions and for equity-based compensation. Negotiated periodic valuations and concentrated ownership are characteristics of private companies rather than outcomes of listing.
- AShares are priced only through periodic negotiated valuations
- BThe firm obtains a market-determined share price that can be used for acquisitions and compensationCorrect
- COwnership becomes more concentrated because of listing rules
Explanation
Listing provides continuous market pricing, which lets firms issue shares for acquisitions and equity compensation. Negotiated valuations are private-firm features, and listing typically disperses ownership.
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