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Offer price and rights issue for Roundtree Software

1. Roundtree Software is going public using an auction IPO. The firm has received the following bids:
Price Number of shares
14.00 100,000
13.80 200,000
13.60 500,000
13.40 1,000,000
13.20 1,200,000
13.00 800,000
12.80 400,000
Assuming Roundtree would like to sell 1.8 million in its IPO, what will the winning auction offer price be?

2. MacKenzie Corporation currently has 10 million shares of stock outstanding at the price of $40 per share. The company would like to raise money and has announced a rights issue. Every existing shareholder will be sent one right per share of stock that he or she owns. The company plans to require ten rights to purchase one share at a price of $40 per share. Assuming the rights issue is successful, how much money will it raise?

Solution Preview

1. Roundtree Software is going public using an auction IPO. The firm has received the following bids:
Price Number of shares
14.00 100,000
13.80 200,000
13.60 500,000
13.40 1,000,000
13.20 1,200,000
13.00 800,000
12.80 400,000

Assuming Roundtree would like to sell 1.8 million in its IPO, what ...

Solution Summary

The solution explains how to determine the winning auction offer price and the amount of money raised from a rights issue

$2.19