A firm is planning an IPO. The underwriters say stock will sell at $20. The direct costs will be $800,000 and underwriters will charge a 7% spread.
(a) How many shares must be sold to net $30 million.
(b) If the stock price closes on day one at $22. per share how much will the firm have left on the table?
(c) What are the firms total costs for the IPO?
Net proceed = 20 * No. of shares - 800000 - 7%*20* No. of shares
That is 30,000,000 = 20 * S - 800,000 - ...
The solution computes estimated stock price, total costs of IPO, no. of shares in different scenario of IPO Offering.