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Sunshine Media has just completed an initial public offering, where 50 million shares of the 125...

Sunshine Media has just completed an initial public offering, where 50 million shares of the 125 million shares outstanding were issued to the public at an offering price of $ 22 per share. On the offering date, the stock price zoomed to $ 40 per share. Who gains from this increase in the price? Who loses, and how much?

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Answer #1

Value of shares at offering price = 50,000,000 * 22

Value of shares at offering price = $1,100,000,000

Value of shares at market price = 50,000,000 * 40

Value of shares at market price = $2,000,000,000

Difference = 2,000,000,000 - 1,100,000,000 = $900,000,000

$900,000,000 is the gain to investors who bought shares from Sunshine Media at the offering price

$900,000,000 is the loss to Sunshine Media who sold shares to investors at the offering price

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