IPO Costs. Moonscape has just completed an initial public offering. The firm sold 3 million shares at an offer price of $8 per share. The underwriting spread was $.50 a share. The price of the stock closed at $12 per share at the end of the first day of trading. The firm incurred $100,000 in legal, administrative, and other costs.
1. Were flotation costs for Moonscape higher or lower than is typical for IPOs of this size (see Figure 14-1)?
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Flotation costs include both the underwriting spread and the costs incurred by the issuing company from the offering. It is expressed as a portion of gross proceeds
The solution discusses whether flotation costs for Moonscape were higher or lower than is typical for IPOs.