How is the initial price of the stock determined?
The initial stock price is determined by the market maker with approval of FINRA. The initial price is based on several factors including the price of the last public offering, assets, and other considerations. The initial price is largely irrelevant, as the first orders in the system will set the price of the stock. In other words, the initial quote price of a stock typically has a very large spread, or difference between the bid and offer price. For example, it may be 2 cents bid by 50 cents offer/ask. But once buy and sell orders enter the system, the quote will reflect those orders.
