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Pricing Shares on IPO

The problem is referring to the signaling study, which states a 30 percent loss of the new equity to be issued is expected on the announcement date.

A company has 200 million shares outstanding trading at $6 a share. The company announces its intention to raise $100 million by selling new shares.

At what price should the company expect its existing shares to sell immediately after the announcement?

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A company has 200 million shares outstanding trading at $6 a share. The company announces its intention to raise $100 million by selling new ...

Solution Summary

This solution is comprised of a detailed explanation to answer at what price should the company expect its existing shares to sell immediately after the announcement.

$2.19