Which of the following, if true, most directly supports Latisha’s posi

QUESTION

Which of the following, if true, most directly supports Latisha’s position, that handling the Textmoor IPO could be risky for the bank?

A) Several other tablets are already being sold by major companies in the competitive tablet market.
B) Olympic Daniels failed to sell all the shares of the last IPO it handled, taking a loss on the activity.
C) In a volatile market, many small investors are reluctant to purchase new issues of stocks.
D) Textmoor only recently got approval from the Securities and Exchange Commission to issue stock.
E) The demand for tablets among young people is continuing to grow.

ANSWER

Answer: A
Explanation: A) If Textmoor’s IPO turns out to be less popular than Brett anticipates, Olympic Daniels may have to sell the shares at a loss or even hold them. So Choice A is correct: The bank should be confident that the company whose stock it is underwriting does in fact stand to grow in market share and profitability relative to its competitors. Choice B might be a contributing factor in Latisha’s caution—once burned, twice shy—but it is not in itself a justification for her position. Conversely, the growth in tablets’ popularity (Choice E) supports Brett’s optimism rather than Latisha’s caution. Neither Choice C nor D is relevant. Investment banks tend to sell to institutional investors rather than to individuals, and companies always need to obtain approval from the SEC before issuing stock.