Your company just sold 1.5 million shares through an IPO offering. The shares were offered at $16 a share and all shares were sold. Your firm received a total of $22.5 million as a fixed commitment. What percent of the offering price did the underwriter's charge as their fee?

Question

Quizplus · Accepted Answer

The total proceeds from the IPO should have been 1.5 million shares * $16 = $24 million. The firm received $22.5 million, so the underwriter's fee was $24 million - $22.5 million = $1.5 million. The fee percentage is ($1.5 million / $24 million) * 100% = 6.25%.

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