Great Cyrus Ltd had its initial public offer (IPO) of shares on the 1st.of June 2019....

 

Transcribed Image Text:

Great Cyrus Ltd had its initial public offer (IPO) of shares on the 1st.of June 2019. The- company. had 40,000,000 shares on issue before the offer. The share- offer was- underwritten by Achaemenid Investments, with total costs of 5 percent of the offer- value. The share offer consisted of 10,000,000 newly issued shares (no shares were sold. by the existing shareholders in this offer). The share offer (subscription) price was $4.00- per share. Subscriptions received by the underwriters at the offer close date were for a- total of 10,000,000 shares. Market share values were as follows:T •- First day close price was $4.80.¶ •- First year anniversary-share price was $6.20 (in the corresponding period, the market- index return was 17.5 percent, while the company's relevant-industry index provided· 14.5 percent- return). Additionally, assume that the market systematic risk beta=1, industry index-beta=D0.8 and the company beta=0.9. Based on the above scenario answer the following questions:| i. → From the IPO-company's perspective, is the share-offer under-priced or over-priced- and-by how much by the end of the first trading day?T ii. → What is the amount raised by the offer (after underwriting costs)?-How much has the- underwriter earned from the IPO?T iii. → Briefly comment on the listing day and subsequent returns performance of this initial· public offer: 1) from the original owner's perspective (i.e. those investors who held- shares before the IPO was initiated), and 2) from the perspective of-investors who- bought into this-IPO-company at the offer subscription price. T Great Cyrus Ltd had its initial public offer (IPO) of shares on the 1st.of June 2019. The- company. had 40,000,000 shares on issue before the offer. The share- offer was- underwritten by Achaemenid Investments, with total costs of 5 percent of the offer- value. The share offer consisted of 10,000,000 newly issued shares (no shares were sold. by the existing shareholders in this offer). The share offer (subscription) price was $4.00- per share. Subscriptions received by the underwriters at the offer close date were for a- total of 10,000,000 shares. Market share values were as follows:T •- First day close price was $4.80.¶ •- First year anniversary-share price was $6.20 (in the corresponding period, the market- index return was 17.5 percent, while the company's relevant-industry index provided· 14.5 percent- return). Additionally, assume that the market systematic risk beta=1, industry index-beta=D0.8 and the company beta=0.9. Based on the above scenario answer the following questions:| i. → From the IPO-company's perspective, is the share-offer under-priced or over-priced- and-by how much by the end of the first trading day?T ii. → What is the amount raised by the offer (after underwriting costs)?-How much has the- underwriter earned from the IPO?T iii. → Briefly comment on the listing day and subsequent returns performance of this initial· public offer: 1) from the original owner's perspective (i.e. those investors who held- shares before the IPO was initiated), and 2) from the perspective of-investors who- bought into this-IPO-company at the offer subscription price. T