Question

In: Finance

Tweet Inc. is planning its initial public offerings (IPO). The firm’s current value of equity is...

Tweet Inc. is planning its initial public offerings (IPO). The firm’s current value of equity is estimated to be $750 million. The founder of Tweet Inc. and a few venture capital funds together hold all the 48 million existing shares, and they want to retain 75% of the firm after the IPO. The floatation costs, including underwriting fees charged by Silverman Sachs, the investment bank, will be 10% of the proceeds. How many shares will be sold and for how much per share?

Please show work using Financial Calculator not excel.

Solutions

Expert Solution

As the founder wants to hold 75% of the shares, so the rest 25% of total shares will be sold = 25% of 48 million = 12 million shares

As the current value of equity is estimated to be 750 million. So each share values to be = 750/48 = 15.625

But there is an flotation cost associated with issuing of IPO which is 10% of the proceeding. So the issue price of the shares will be marked up by 10% of their intrinsic value = 15.625*1.1 = $17.1875

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Research a current article from a reputable scholarly source on the subject of Initial Public Offerings...
Research a current article from a reputable scholarly source on the subject of Initial Public Offerings (IPOs). Briefly summarize your findings and how the information relates to the concepts you know. Compare and contrast new debt offerings to new offerings of equity in the form of stock. Specifically, be sure to comment on the direct and indirect costs of new public debt versus new public equity. Provide an appropriate reference and citation(s) for both the article and the related concepts...
Initial public offering  On April​ 13, 2017​, Yext Inc. completed its IPO on the NYSE. Yext...
Initial public offering  On April​ 13, 2017​, Yext Inc. completed its IPO on the NYSE. Yext sold 10,500,000 shares of stock at an offer price of ​$11 with an underwriting discount of ​$0.77 per share.​ Yext's closing stock price on the first day of trading on the secondary market was ​$13.41,and 85,489,470 shares were outstanding. a. Calculate the total proceeds for​ Yext's IPO. b. Calculate the percentage underwriter discount. c. Calculate the dollar amount of the underwriting fee for​ Yext's...
In 2010 you bought 12 initial public offerings (IPOs) of common equity of which there were...
In 2010 you bought 12 initial public offerings (IPOs) of common equity of which there were 22 in total. You held each of these for approximately one month and then sold them. The 22 IPOs were all for oil- and gas-exploration companies. You submitted a purchase order for approximately $1000 of equity for each one. With 10 of these, no shares were allocated to you. With five of the 12 offerings that were purchased, fewer than the requested number of...
Initial public offerings (IPO’s) have a reputation for being underpriced.
Initial public offerings (IPO’s) have a reputation for being underpriced. Thus, if you can obtain shares of an underpriced IPO, you might make a large profit on the first day of trading. In contrast to underpriced IPO’s, there are overpriced IPO’s. An overpriced IPO is one in which the price typically declines on the first day of trading. Thus, obtaining shares of an overpriced IPO may result in negative returns on the first trading day.You decide to start an investment...
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?
An Initial Public Offering (IPO) is a major milestone for a company. This is a very...
An Initial Public Offering (IPO) is a major milestone for a company. This is a very expensive and time-consuming process. It does not come without a lot of forethought and judicial weighing of the pros and cons. We will start this conversation by looking at some of the reasons why a company would decide to take the steps to become a publicly traded corporation. What pros and cons have to be weighed? Instructions - Use the numbers in the instructions...
One of the theories regarding initial public offering (IPO) pricing is that the initial return y(the...
One of the theories regarding initial public offering (IPO) pricing is that the initial return y(the percentage change from offer to open price) on an IPO depends on the price revision x (the percentage change from pre-offer to offer price). Another factor that may influence the initial return is a high-tech dummy variable that equals 1 for high-tech firms and 0 otherwise. The following table shows a portion of the data on 264 IPO firms from January 2001 through September...
A Direct Public Offering (DPO, Direct-Listing) is an alternative to an Initial Public Offering (IPO) in...
A Direct Public Offering (DPO, Direct-Listing) is an alternative to an Initial Public Offering (IPO) in which a company does not work with an investment bank to underwrite the issuing of stock. While forgoing the safety net of an underwriter provides a company with a quicker, less expensive way to raise capital, the opening stock price will be completely subject to market demand and potential market swings. In a DPO, instead of raising new outside capital like an IPO, a...
Recently the social networking site Facebook had a successful Initial Public Offering (IPO) of its business....
Recently the social networking site Facebook had a successful Initial Public Offering (IPO) of its business. Write a report on the financial coverage of the financial securities. Is an IPO a primary market transaction or a secondary market transaction? Post IPO, what actions did the senior management take to maximize the shareholders’ interests? Give reasons. Using book Essentials of Corporate Finance
Recently the social networking site Facebook had a successful Initial Public Offering (IPO) of its business....
Recently the social networking site Facebook had a successful Initial Public Offering (IPO) of its business. Write a report on the financial coverage of the financial securities. Is an IPO a primary market transaction or a secondary market transaction? Post IPO, what actions did the senior management take to maximize the shareholders’ interests? Give reasons. Please Provide Sources
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT