Your firm has 10 million shares outstanding, and you are about to issue 5 million new shares
Question:
a. How much did your firm raise from the IPO?
b. What is the market value of the firm after the IPO?
c. Assume that the post-IPO value of your firm is its fair market value. Suppose your firm could have issued shares directly to investors at their fair market value, in a perfect market with no underwriting spread and no underpricing. What would the share price have been in this case, if you raise the same amount as in part (a)?
d. Comparing part (b) and part (c), what is the total cost to the firm’s original investors due to market imperfections from the IPO?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: