Your firm is selling 3 million shares in an IPO. You are targeting an offer price of
Question:
Your firm is selling 3 million shares in an IPO. You are targeting an offer price of $17.25 per share. Your underwriters have proposed a spread of 7%, but you would like to lower it to 5%. However, you are concerned that if you do so, they will argue for a lower offer price. Given the potential savings from a lower spread, how much lower can the offer price go before you would have preferred to pay 7% to get $17.25 per share?
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Plan First we must compute the underwriting spread Then we can compute the lowe...View the full answer
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