1. BJ’s Wholesale Club Holdings went through IPO on 6/28/2018. Approximately 37.5 million shares were offered...

1. BJ’s Wholesale Club Holdings went through IPO on 6/28/2018. Approximately 37.5 million shares were offered at a price of $17/share. A total of $36,656,250 was paid as underwriting fees. The price rose to roughly $21 on the first day of trading. What was BJ’s loss (at best) in this IPO? (0.5)

Expert Solution

Number of shares offered in IPO = 37.5 million

IPO Price = $17 / share

Listing Price (Price on 1st day of trading) = $21 / share

Underwriting fees = $36,656,250

Loss in terms of underpricing of IPO i.e. Charging less per share in IPO than what could have been charged:

= Number of Shares * (Listing Price - IPO Price)

= 37.5 * (21 - 17)

= 37.5 * 4

= $150 million

Company has lost $150 million by charging less per share in the IPO than what it was worth as per listing price.

Total Loss in IPO = Underpricing Loss + Underwriting Fees Paid

Total Loss in IPO = $150 million + $36,656,250

Total Loss in IPO = $186.656 million

BJ's at best loss in this IPO would be to the tune of $186.656 million.

jeff jeffy answered 2 years ago

A best efforts IPO underwriting comprised 5.8 million shares at an offer price of $28 per...

A best efforts IPO underwriting comprised 5.8 million shares at an offer price of $28 per share. The underwriter's fee was set at 5.85 percent. How many shares were sold if the issuer received $84,324,892?

A company recently completed its Initial Public Offering (IPO). The shares were offered for sale at...

A company recently completed its Initial Public Offering (IPO). The shares were offered for sale at $40 each. On the first day of trading on the stock exchange the share price was $64.35. Why weren't the shares offered for sale at a higher price?

Maxi Berhad offered 1 million ordinary shares for issue to public on 1 January 2018 having...

Maxi Berhad offered 1 million ordinary shares for issue to public on 1 January 2018 having face value of RM1 each at an issue price of RM1.50 per share. Maxi Berhad requires the equity injection to finance a new project. The minimum amount of subscription necessary for the project is RM1,250,000. As per the terms of the issue of shares, RM1.50 per share was to be received in full from the applicantson 30November 2018. A total amount of RM3,000,000 was...

Fizer Pharmaceutical paid $78 million on January 2, 2018, for 6 million shares of Carne Cosmetics...

Fizer Pharmaceutical paid $78 million on January 2, 2018, for 6 million shares of Carne Cosmetics common stock. The investment represents a 25% interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne’s operations. Fizer received dividends of $2 per share on December 21, 2018, and Carne reported net income of $28 million for the year ended December 31, 2018. The fair value of Carne’s common stock at December 31, 2018, was...

July 1 The company decided that 1,500,000 ordinary shares were to be offered to the public...

July 1 The company decided that 1,500,000 ordinary shares were to be offered to the public at an issue price of $3, payable as follows: $1.50 on application (due 1 August) $0.50 on allotment (due 30 August) $1 on future calls August 1 Applications had been received for 1,750,000 shares of which applicants for 300,000 shares forwarded the full $3 per share, the remainder paying only the application money. August 5 At the directors’ meeting it was decided to allot...

q. 28 Witter House is a calendar-year firm with 370 million common shares outstanding throughout 2018...

q. 28 Witter House is a calendar-year firm with 370 million common shares outstanding throughout 2018 and 2019. As part of its executive compensation plan, at January 1, 2017, the company had issued 30 million executive stock options permitting executives to buy 30 million shares of stock for $15 within the next eight years, but not prior to January 1, 2020. The fair value of the options was estimated on the grant date to be $2 per option. In 2018,...

q.28 Witter House is a calendar-year firm with 370 million common shares outstanding throughout 2018 and...

q.28 Witter House is a calendar-year firm with 370 million common shares outstanding throughout 2018 and 2019. As part of its executive compensation plan, at January 1, 2017, the company had issued 30 million executive stock options permitting executives to buy 30 million shares of stock for $15 within the next eight years, but not prior to January 1, 2020. The fair value of the options was estimated on the grant date to be $2 per option. In 2018, Witter...

GonnaBeBig (GBB) went through a round of fundraising and raised $1 million from investors by selling...

GonnaBeBig (GBB) went through a round of fundraising and raised $1 million from investors by selling them 1 million shares at $1 each. How will this affect GonnaBeBig’s income statement? How will this affect GonnaBeBig’s balance sheet? b . Suppose GBB had raised the money by selling convertible notes (convertible debt). How would this change the effect on GBB’s balance sheet?

Boeing had $1,000,000 net income in 2018. On January 1, 2018, there were 200,000 shares of...

Boeing had $1,000,000 net income in 2018. On January 1, 2018, there were 200,000 shares of common stock outstanding. There are 30,000 options to buy common stock at $40 a share outstanding. The market price of the common stock averaged $50 during 2018. The tax rate is 30%. During 2018, there were 40,000 shares of preferred stock outstanding. The preferred is $100 par, pays $3.50 a year dividend. Boeing issued $2,000,000 of 8% convertible bonds at face value during 2017....

On January 1, 2018, Hugh Morris Comedy Club (HMCC) granted 1.4 million stock options to key...

On January 1, 2018, Hugh Morris Comedy Club (HMCC) granted 1.4 million stock options to key executives exercisable for 1.4 million shares of the company’s common stock at $30 per share. The stock options are intended as compensation for the next three years. The options are exercisable within a four-year period beginning January 1, 2021, by the executives still in the employ of the company. No options were terminated during 2018. The market price of the common stock was $32...

Question