IPO pricing: Black Stump, Ltd., a technology company in St Kilda, Melbourne, issues a $66 million IPO priced at $17 per share, and the offering price to the public is $22 per share. The company's legal fees, ASIC registration fees, and other administrative costs are $350,000. The company's share price increases 15 per cent on the first day. What is the company's total cost of issuing the securities?

Question

Quizplus · Accepted Answer

The total number of shares issued in the IPO can be found by dividing the total amount raised by the offering price per share:

$66 million / $22 per share = 3 million shares

The total value of the shares at the offering price is:

3 million shares * $22 per share = $66 million

The total cost of issuing the securities is the sum of the fees and costs incurred by the company:

$350,000 + ($66 million - $66 million * 0.15) = $350,000 + $56.1 million = $56.45 million

Therefore, the best answer is C, $25.25 million, as it represents the total amount of costs incurred by the company, including the fees and costs associated with the IPO.

IPO Pricing: Black Stump, Ltd