Which of the following statements is FALSE? (Sections 3.2, 3.3 & 3.4)

Question

BlackTom AI · Accepted Answer

The prompt asks to identify which statement is FALSE, but the provided data includes no answer options to evaluate, only a single statement in the "answer" field.

What we have is: The shares that are sold in the IPO may either be new shares that raise new capital, known as a secondary offering, or existing shares that are sold by current shareholders (as part of their exit strategy), known as a primary offering.

To analyze this, recall standard definitions in IPOs:
- Primary offering: new shares issued by the company to raise fresh capital. This increases the company’s equity and participating shareholders dilute their ownership.
- Secondary offering: existing shares held by current shareholders (such as founders, employees, or early investors) are sold to investors. This does not raise new capital for the company itself; it provides liquidity to sellers.

Given these definitions, the statement above swaps the terminology: it says new shares are a secondary offering and existing shares are a primary offering. This is incorrect, because the correct pairing is opposite: new shares = primary offering; existing shares = secondary offering.

However, since there are no alternative options provided to compare against, we cannot systematically evaluate multiple choices and determine which of them is false. If the intent was that the single listed statement is the false one, your understanding above confirms that it is indeed false because it reverses the standard definitions.

In summary: the core misconception highlighted by the given statement is the mislabeling of primary versus secondary offerings. Primary offerings involve new capital via new shares, while secondary offerings involve selling existing shares. If there were additional options, we would assess each one against these definitions to determine which is false.

FINANCE 351 Quiz 11 Raising Capital

Which of the following statements is FALSE? (Sections 3.2, 3.3 & 3.4)

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