Nelson Paints recently went public by offering 50,000 shares of common stock to the public. The underwriters provided their services in a best efforts underwriting. The offering price was set at $17.50 a share and the gross spread was $2.30. After completing their sales efforts, the underwriters determined that they sold a total of 47,500 shares. How much cash did the company receive from its IPO?

Question

Quizplus · Accepted Answer

The company received $17.50 per share for 47,500 shares, which equals $831,250. The gross spread is $2.30 per share, which means the underwriters received $2.30 per share for 47,500 shares, which equals $109,250. The company received $831,250 - $109,250 = $722,000.

Nelson Paints Recently Went Public by Offering 50,000 Shares of Common