The Bostitch Co. has just gone public. Under a firm commitment agreement, Bostit
ID: 2696623 • Letter: T
Question
The Bostitch Co. has just gone public. Under a firm commitment agreement, Bostitch received $32.70 for each of the 4.17 million shares sold. The initial offering price was $35.10 per share, and the stock rose to $42.40 per share in the first few minutes of trading. Bostitch paid $912,000 in legal and other direct costs and $264,000 in indirect costs.
What was the flotation cost as a percentage of funds raised?
The Bostitch Co. has just gone public. Under a firm commitment agreement, Bostitch received $32.70 for each of the 4.17 million shares sold. The initial offering price was $35.10 per share, and the stock rose to $42.40 per share in the first few minutes of trading. Bostitch paid $912,000 in legal and other direct costs and $264,000 in indirect costs.
Explanation / Answer
Spread = (34.40-32)*4.1 =$9.84 MILLION
Total floatation cost = 9.84 million +.905 million + .25 million =10.995 million
flotation cost as a percentage of fund raised =10.995/(32*4.1) =8.38%
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