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.

a. What were flotation costs as a fraction of funds raised?

b. Were flotation costs for Moonscape higher or lower than is typical for IPOs of this size (Figure 15.1)?

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10 IPOs ■ Convertibles I SEOs ■ Bonds Proceeds (S millions)