Your investment bankers price your IPO at $15.26 per share for 9.5 million shares.

Your investment bankers price your IPO at $15.26 per share for 9.5 million shares. If the price at the end of the first day of trading is $17.16 per share,
a. What was the percentage underpricing?
b. How much money did the firm miss out on due to underpricing?

Expert Solution

% underpricing = (Price on Day 1 - Issue Price)/Issue Price

= (17.16 - 15.26)/15.26

= 12.45%

b.Money missed out = (17.16-15.26)*9,500,000

= $18,050,000

jeff jeffy answered 2 years ago

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