Hughes Technology Corp. recently went public with an initial public offering in which they received a total of $42 million in new capital funding. The underwriter used a firm commitment offering in which the offer price was $22 and the underwriter's spread was $0.85. Hughes also paid legal and other administrative costs of $825,000 for the IPO. Calculate the number of shares issued through this IPO.
A) 2,024,823
B) 3,125,000
C) 3,328,864
D) 4,002,179

Question

Quizplus · Accepted Answer

The number of shares issued can be calculated using the formula:Number of shares = Total capital raised / (Offer price - Underwriter's spread)Substituting the given values, we get:Number of shares = $42 million / ($22 - $0.85) = 2,024,823 sharesTherefore, the correct answer is A) 2,024,823.