Q2. The largest U.S. IPO was the $19.7 billion sale of stock by the credit card...

Q2. The largest U.S. IPO was the $19.7 billion sale of stock by the credit card company

Visa in 2008. A syndicate of 45 underwriters acquired a total of 446.6 million Visa

shares for $42.768 each and then resold them to the public at an offering price of

$44. The underwriters’ spread was therefore $44 2 $42.768 5 $1.232. The firm also

paid a total of $45.5 million in legal fees and other costs. 5 Therefore, the direct costs

of the Visa issue were as follows:

Solutions

Expert Solution

Spread of the underwriters is the difference between the issue price and the price offered to underwriters = $44-$42.768=$1.232.

Direct cost = legal fee and other costs + underwriting cost = $45.5 mn + (underwriting spread * no of shares underwritten)= 45.5 mn + (1.232* 446.6 mn) = $ 595.71 mn

jeff jeffy answered 2 years ago

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