Amazon.com issued an initial public offering in May 1997. Prior to its IPO, the following information on shares outstanding was listed in the final prospectus:

In the IPO, the firm issued 3,000,000 new shares. The initial price was $18.00/share with investment bankers retaining $1.26 as fees. The final first-day closing price was $23.50.

Xavi decides to short sell 10,000 shares of Guiness Co. stock, currently trading at $7.00 per share. Determine Xavi’s profits if Guiness stock trades at
$5.00 per share at the moment in which Xavi has to buy the shares back.

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Name and Address Jeffrey P. Bezos c/o Amazon.com, Inc. 1516 Second Avenue, 4th Floor Seattle, WA 98101 L. John Doerr Kleiner Perkins Caufield & Byers 4 Embarcadero Center, Suite 3520 San Francisco, CA 94111 Tom A. Alberg Scott D. Cook Patricia Q. Stonesifer All directors and executive officers as a group (14 persons) Total shares outstanding Number of Shares Beneficially Owned 9,885,000 3,401,376 195,000 75,000 75,000 15,688,925 20,858,702 Percentage of Shares Outstanding Prior to Offering 7.5% 16.4 * * * 72.5 100.0 After Offering 41.4% 14.3 63.5