Liability – What liability can a company face in an IPO? – (68)

market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market prior to the completion of the offering.
Stabilizing transactions consist of various bids for or purchases of the company’s common stock made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a portion of the underwriting discount received by it because the sole book-running manager has repurchased shares of the common stock sold by or for the account of that underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions may have the effect of preventing or slowing a decline in the market price of the common stock. In addition, these purchases, along with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the relevant exchange, in the over-the-counter market or otherwise.
Liability
What liability can a company face in an IPO?
Civil and criminal liability may arise under the Securities Act from material misstatements or omissions in a registration statement when it becomes effective or in a preliminary prospectus upon which a contract for

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