Question

Felton Publishing recently completed its IPO. The stock was offered at a price of $13.31 per share. On the first day of trading, the stock closed at $18.41 per share. If Felton Publishing paid an underwriting spread of 6.9% for its IPO and sold 5 million shares, what was the total cost (exclusive of underpricing) to it of going public? The total cost of going public was $million. (Round to one decimal place.)

Answer 1

Offer Price = $ 13.31 and Number of Shares Issued = 5 million

Amount of Capital Raised = 5 x 13.31 = $ 66.55 million

Underwriting Spread = 6.9 % of the Amount of Capital Raised = 0.069 x 66.55 = $ 4.5919 million ~ $ 4.59 million

Total Cost of Going Public (excluding underpricing cost) = Undewriting Spread (Fees) = $ 4.59 million