What is the primary purpose of an investment bank during an IPO?

• A. To supervise ongoing company operations after the IPO.
• B. To determine share quantity and pricing and connect with potential buyers.
• C. To issue municipal bonds for the city.
• D. To market the company's products to customers.

Answer: (B)

In an IPO, the investment bank’s main job is to price and sell the new shares to investors. They determine how many shares will be issued and at what price, a process called underwriting and price discovery. They also connect the company with potential buyers—especially large institutional investors—through roadshows and book-building to gauge demand. By underwriting, they may guarantee to purchase the shares and then resell them, taking on risk and providing the credibility and structure needed to access public markets. Other listed tasks aren’t the primary function: supervising post-IPO operations is the company’s management role, issuing municipal bonds is for governments, and marketing the company’s products is the company’s own sales function.