Roundtree Software is going public using an auction IPO. The firm has received t

Question

Roundtree Software is going public using an auction IPO. The firm has received the following bids:

Price ($)

Number of Shares

14.20

180,000

14.00

280,000

13.80

500,000

13.60

1,150,000

13.40

1,240,000

13.20

880,000

13.00

420,000

Roundtree had previously believed it would issue 2,100,000 shares; however, if Roundtree decides to issue an extra 534,000 shares (for a total of 2,634,000 shares), how much total money will it raise?

Price ($)

Number of Shares

14.20

180,000

14.00

280,000

13.80

500,000

13.60

1,150,000

13.40

1,240,000

13.20

880,000

13.00

420,000

Explanation / Answer

Roundtree will selling shares starting with the top bid of $14.2 and take all bids up to $13.6, selling a total of 2,110,000 shares. The remaining shares = 524,000 = 2,634,000 - 2,110,000 will be sold at $13.4.

Total Amount raised = Sum of bid x shares = Sum of amount = $36,037,600

Bid Shares Amount 14.2 180,000 2556000 14 280,000 3920000 13.8 500,000 6900000 13.6 1,150,000 15640000 13.4 524,000 7021600 Total 36037600

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