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 $160,000.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} + $160,000) / ($22 × 250,000) = 0.0568, or 5.68%

An IPO Was Priced to Sell at $23 a Share