An IPO was priced to sell at $23 a share and closed at $22 a share at the end of the first day of trading. The underwriting spread was 7% of the offer price and the legal, accounting and administrative costs were $1.6 million. What was the total percentage cost of the issue as a percentage of the market value at the end of the first day if 250,000 shares were offered?

Question

Quizplus · Accepted Answer

Total cost % = ({[$22 - $23 × (1 - 0.07)] × 250,000} + $1.6m)/($22 × 250,000) = 0.3186, or 31.86%

An IPO Was Priced to Sell at $23 a Share