What is ‘Issue Price’?

This question was previously asked in
SSC GD Constable Previous Year Paper (Held on: 8th December 2021 Shift 2) 
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  1. It is the same price as the market price.
  2. It is a price lower than the market price.
  3. It is a price fixed by the farmer.
  4. It is a price higher than the market price.

Answer (Detailed Solution Below)

Option 2 : It is a price lower than the market price.
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Detailed Solution

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The correct answer is It is a price lower than the market price.

Key Points

  • The issue price is the price at which shares are offered for sale when they first become available to the public.
    • It is a price lower than the market price.
  • When the issuer at the outset decides the issue price and mentions it in the offer document, it is in the offer document, it is commonly known as a “Fixed price issue
  • When the price of an issue is discovered on the basis of demand raised from prospective investors at various investors at various price levels, it is called a ‘Book built issue

Additional Information

  • An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. 
  • Fixed Price Issues and Book Built Issues are two major types of IPO.
  • All types of investors are required to bring in 100% of the application money as a margin along with the application for securities in Public Issues.
  • This has been done to avoid inflated demand in Public Issues and to provide a level playing field to all investors subscribing to securities.
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