Apply multiple approach to estimation of the value of stocks for company doing a
ID: 2753512 • Letter: A
Question
Apply multiple approach to estimation of the value of stocks for company doing an IPO. What could be suggested IPO share price? The following data are available:
Company Mert`s equity includes 28% of capital held by controlling shareholders, that is equal to 35 000 shares. Company`s peers and Mert`s financial data:
Company
Market CAP
Earnings
ABC
980,000
50,000
NBV
890,000
37,000
BGT
910,000
(23,000)
MTY
767,000
32,000
RTB
823,000
28,000
Mert
34,000
Company
Market CAP
Earnings
ABC
980,000
50,000
NBV
890,000
37,000
BGT
910,000
(23,000)
MTY
767,000
32,000
RTB
823,000
28,000
Mert
34,000
Explanation / Answer
The market cap is a multiple of earnings for the given companies.
The mean of earnings in absolute terms is 27.31
Applying this value to earnings Mert Mkt Cap should be 34000*27.31= 928750
We also know 35000 shares are 28% therefore total shares are 35000/.28 = 125000
Suggested Price would be = 928750/ 125000 = 7.43
Suggested IPO price for
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