IPO pricing: InfoNeed, Ltd., issues a $38.6 million IPO priced at $12.50 per share, and the offering price to the public is $19.30 per share. The company's legal fees, ASIC registration fees, and other administrative costs are $270,000. The company's share price increases 18 per cent on the first day. What is the underwriting cost?

Question

Quizplus · Accepted Answer

The underwriting cost is the difference between the offering price to the public and the price paid by the underwriter. In this case, the offering price to the public is $19.30 per share and the price paid by the underwriter is $12.50 per share. Therefore, the underwriting cost is $19.30 - $12.50 = $6.80 per share. The total underwriting cost is $6.80 per share multiplied by the number of shares issued, which is 38.6 million shares. Therefore, the total underwriting cost is $6.80 per share * 38.6 million shares = $262.88 million.

IPO Pricing: InfoNeed, Ltd