Final answer:
The new company trades as a when-issued security and will settle after the shares become available for delivery. An IPO allows a company to receive financial capital, with the rate of return for stockholders coming through dividends and capital gains. Option A
Step-by-step explanation:
When a company conducts a spin-off and the physical shares of the spin-off are not yet available for delivery, the new company will typically trade as a when-issued security, indicated by answer choice A. A when-issued security is one that has been authorized but not yet issued.
Trading on a when-issued basis means the trade will settle after the shares become available for delivery. This condition is common in spin-offs, initial public offerings (IPOs), and other similar corporate actions. In contrast to regular-way settlement, when-issued trades consider the delay between the transaction and the actual availability of the security.
Regarding stock offerings such as an IPO, a company receives financial capital only when they sell their own stock to the public—investors such as individuals, mutual funds, insurance companies, and pension funds.
The rate of return promised to stockholders usually comes in two forms: dividends and capital gains. Major decisions within a company owned by a large number of shareholders are typically made by elected board members who act in the best interest of the shareholders. Option A