Final answer:
Laddering is the practice of an investor agreeing to buy more shares in the secondary market after an IPO. IPOs are essential for repaying investors and expanding operations. Returns on stocks come from dividends and capital gains, and companies are managed by their executives and directors, with shareholders having voting rights.
Step-by-step explanation:
The practice described in the question, where an investor is allotted a number of shares with the understanding that they will increase their position by purchasing shares in the secondary market on or after the effective date, is known as B) Laddering.
Initial public offerings (IPOs) are critical for firms as they provide the necessary capital to repay early-stage investors such as angel investors and venture capital firms, and they allow for substantial expansion of company operations. A venture capital firm might sell its ownership percentage in the firm during the IPO. It's also important to note that companies do not promise a specific rate of return when they sell stock; instead, investors earn returns through dividends and capital gains.
Corporations are managed by their management teams and overseen by a board of directors, which are accountable to the shareholders. Shareholders vote on important company decisions, usually at annual meetings, with the weights of their votes being proportional to the number of shares they hold.