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To: Jack of All Trades who wrote (25057)	12/13/2001 1:04:30 PM
From: NOW	Respond to of 209892

<implicit puts....>

To: Jack of All Trades who wrote (25057)	12/13/2001 4:45:07 PM
From: UnBelievable	Respond to of 209892

It Is An Implicit Put When the Underwriter prices an offering they are performing a professional, expert function, for which they have explicitly stated they are qualified, and in fact have been licensed to perform. The price that they establish as the issue price represents their professional opinion of the value of the security. The issue price is one of the pieces of information in the prospectus that investors have the right to rely upon. They have the same liability with regard to the issue price (their professional opinion of the market value of the security) as do the accountant and lawyers for the professional opinions they offer in the prospectus. If a new security where to trade materially below the issue price anyone who bought that security at the issue price would have a claim against the underwriter for the difference. Unless the underwriter can show that the reason was an error or omission on the part of any of the parties upon whose advice they relied (accountants, lawyers, executives of the company) they would be liable. That's why it is said that the underwriter is writing a put on the shares at the at issued price. This is a link to a presentation about IPO's which I came across. It explains in reasonable detail why there IPO's are systematically under priced and deals with the implicit put option issue on slide 27. schwert.ssb.rochester.edu