13.23 Bellex Technologies agreed to complete its IPO on a best-effort basis. The

Question

13.23

Bellex Technologies agreed to complete its IPO on a best-effort basis. The company’s investment bank demanded a spread of 6 percent of the offer price, which was set at $26.10 per share. Three million shares were issued; however, the bank was overly optimistic and eventually was able to sell all of the stock for only $24.10 per share. What were the proceeds for the issuer and the underwriter?

Proceeds to issuer $____________

Proceeds to underwriting $____________

Problem 13.23 Bellex Technologies agreed to complete its IPO on a best-effort basis. The company's investment bank demanded a spread of 6 percent of the offer price, which was set at $26.10 per share. Three million shares were issued; however, the bank was overly optimistic and eventually was able to sell all of the stock for only $24.10 per share. What were the proceeds for the issuer and the underwriter? Proceeds to issuer Proceeds to underwriting s

Explanation / Answer

Gross proceeds from offer = $26.10 × 3,000,000 = $78,300,000

Proceeds to underwriting = $78,300,000 × 0.06 = $4,698,000

Proceeds to issuer = ($24.10 × 3,000,000) $4,698,000 = $67,602,000

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