Final answer:
The process by which underwriters strive to sell shares of a newly listed company at the highest possible price is called an Initial Public Offering (IPO) (a). It is crucial for repaying early-stage investors and securing capital for the company's growth. Venture capitalists can sell their ownership during an IPO and usually have better insights into the company's operations.
Step-by-step explanation:
When a company becomes listed on a stock exchange, underwriters aim to attract many investors to purchase the newly listed shares at the highest possible price. This process is known as an Initial Public Offering (IPO). An IPO is significant as it not only helps in repaying early-stage investors like angel investors and venture capital firms but also provides the established company with financial capital to expand its operations significantly. Unlike issuing bonds or borrowing money, which obliges a company to make interest payments, issuing stock through an IPO does not require a company to make such payments, though it may opt to pay dividends.
When a firm sells its stock in an IPO, venture capital firms may sell their part ownership to the public. Venture capitalists, who frequently hold a substantial stake in the firm, typically have better information about the company's management and strategy, helping to reduce the problem of imperfect information that a typical shareholder might face.