Kate is the sole founder of the exclusive retail store, Kate\'s Interiors. Kate

Question

Kate is the sole founder of the exclusive retail store, Kate's Interiors. Kate identified additional locations that she believed offered profitable opportunities for expansion so decided to take her firm public in order to finance her expansion plans. Bob is an investor who purchased shares of Kate's Interiors stock at the offer price. After one month as a public firm, Kate realized that Bob had earned $1.1 million in profit on his investment and had already cashed out and moved on. Kate, on the other hand, had made no profit and still owns her shares. Explain how this could happen.

Explanation / Answer

Since Kate's company issues shares in IPO She can’t sell within a stipulated period of 6 month due to lock in agreement as per the terms of IPO which prevents are from selling her shares even if her share value appreciates. This is done to prevent insider trading. Such restrictions are not imposed on BOB.

Related Questions

Navigate

• Browse (All)
• Browse K
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.