The founder of a company currently holds 12 million of the 15 million shares in that company.She considers an IPO where she sells a mix of primary shares and 2 million of her own secondary shares for $18 per share.If she wants to retain a 60% ownership of the company,how much money can she raise in this IPO?

Question

Quizplus · Accepted Answer

The total number of shares in the company is 15 million, and the founder currently holds 12 million shares so there are 3 million shares left.
If the founder wants to retain 60% ownership, then the total number of shares after the IPO will be 25 million (15 million current shares + 10 million new shares).
To retain 60% ownership, the founder needs to hold 15 million shares after the IPO. 
This means she needs to sell 10 million shares in total: 8 million primary shares and 2 million of her own secondary shares.
The amount of money she can raise is calculated as follows: 
- 8 million primary shares x $18 per share = $144 million 
- 2 million secondary shares x $18 per share = $36 million 
Total amount raised = $180 million 
Since the founder can only sell 2 million of her own shares, the maximum amount she can raise is $36 million. 
Therefore, the correct answer is D) $66 million.

The Founder of a Company Currently Holds 12 Million of the 15