A government is currently considering the privatisation of the national airline. The shares are to be offered to the public via a fixed price Initial Public Offering (IPO).
Which THREE of the following statements are correct?
A.
An IPO is normally underwritten
B.
The government will receive significant financial resources from the sale of its shareholding in the national airline.
C.
The rational airline employees will no longer be public sector employees following the completion of the privatisation
D.
The use of a fixed price offer will ensure that the government raises the maximum amount of finance.
E.
The rational airline will receive significant financial resources as a direct result of the shares company shares in the IPO.
A. An IPO is normally underwritten – Correct. For a fixed-price IPO, underwriters usually guarantee that the issue will be taken up, giving certainty of proceeds.
B. The government will receive significant financial resources from the sale – Correct. In a privatisation, the government is selling its ownership stake; the cash from selling these shares flows to the government.
C. The national airline employees will no longer be public sector employees – Correct. Once privatised, the airline becomes a private-sector company; its staff cease to be public-sector employees.
D is incorrect: a fixed-price offer does not guarantee maximum proceeds – the shares are often deliberately underpriced to ensure the issue is fully subscribed.
E is incorrect: in this scenario the proceeds go to the government as seller of existing shares, not directly to the airline itself.
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