Question

Follow-on Public Offering A Brazilian company called Netshoes completed its IPO on April 12, 2017 , and listed on the NYSE. Later, Netshoes sold 8250000 shares of stock to primary market investors in a follow-on offering at a price of $ 18.00 , with an underwriting discount of 6.5 %. Secondary market investors, however, were paying only $16.10 per share for Netshoes' 31025936 shares of stock outstanding. a. Calculate the total proceeds for Netshoes' follow-on offering. b. Calculate the dollar amount of the underwriting fee for Netshhoes' second offering. c. Calculate the net proceeds for Netshoes' second offering. d. Calculate market capitalization for Netshoes' outstanding stock prior to the follow-on issue. e. Calculate IPO underpricing for Netshoes' follow-on offering. f. Explain the follow-on underpricing for Netshoes.

a. The total proceeds for Netshoes' follow-on offering is

b. The dollar amount of the underwriting fee for Netshoes' second offering is

c. The net proceeds for Netshoes' second offering is

d. Netshoes' market capitalization is

e. Netshoes' follow-on underpricing is

f. Explain the follow-on underpricing for Netshoes. (Select the best answer below.)

A.

Negative underpricing indicates secondary market investors are not willing to pay as much for new shares as primary market investors were for existing shares.

B.

Negative underpricing indicates secondary market investors are not willing to pay as much for existing shares as primary market investors were for new shares.

C.

Negative underpricing indicates secondary market investors are willing to pay more for existing shares than primary market investors were for new shares.

D.

Negative underpricing indicates primary market investors are not willing to pay as much for existing shares as secondary market investors were for new shares.

Answer 1