Final answer:
The initial return on Margoles publishing IPO was 35.71%, calculated from the difference between the offering price and the closing price on the first trading day. Underpricing benefited early investors who saw immediate gains, while the company and its early investors could have potentially raised more capital.
Step-by-step explanation:
The initial return on Margoles publishing after their IPO can be calculated by the increase in the stock price from the initial offering to the closing price on the first day of trading. Since Margoles stock was offered at a price of $14 per share and closed at $19 per share, this represents a initial return of ($19 - $14) / $14 = 35.71%.
The underpricing of the IPO, where the stock was offered at a lower price than the closing price on the first day, benefits the initial investors who purchased at the IPO price, as they see immediate gains. These investors could be institutional investors, such as mutual funds and hedge funds, or individuals who are allocated shares during the IPO. On the other hand, the company itself and potentially its early investors, such as angel investors and venture capitalists, might 'lose' in the sense that they could have raised more capital if the stock was priced closer to the market equilibrium as reflected by the closing price.