Final answer:
The notion that any investor can make money by purchasing shares in all IPOs because they are underpriced on average is not accurate. IP, the possibility of profits exists, but there are significant risks, and returns are not guaranteed. Company decisions are made by a board of directors, not individual investors.
Step-by-step explanation:
The statement "Because initial public offerings of common stock are underpriced on average, any investor can make money by purchasing shares in all offerings" is not necessarily true. Although initial public offerings (IPOs) can be underpriced, which may allow investors to potentially profit from price increases post-IPO, it is not a guarantee that investing in all IPOs will be profitable. There are risks involved in any investment, and not all IPOs perform well after their launch. The stock market is influenced by numerous unpredictable factors, making it impossible to promise a certain rate of return. When a company sells stock, it does not promise a specific rate of return; instead, the return on investment depends on the future performance of the company and market conditions.
Furthermore, in a company owned by a large number of shareholders, decisions are typically made by a board of directors elected by the shareholders. The board is responsible for the governance of the company, which includes making significant business decisions and overseeing management. However, individual investors, especially small ones, do not have a direct role in day-to-day decision-making.