Ethanol Lawn Mowers issued 500,000 shares to the public. The gross proceeds were $31,250,000 and the net proceeds were $30 million. Merrel Bench was the lead underwriter and deal negotiator,but 10 other investment bankers (one of which was Golden Sax)were also used to put up capital and help sell the issue. Which of the following statements is/are correct?
I. The public paid $62.50 a share.
II. Golden Sax was the originating house.
III. The spread per share was $3.50.
IV. Merrel Bench is the sole book running manager.
V. This offer was a syndicated deal.

Question

Quizplus · Accepted Answer

I. The gross proceeds of $31,250,000 divided by 500,000 shares equals $62.50 per share, which is what the public paid. 
II. There is no information given to support this statement; it is not mentioned who the originating house was. 
III. The spread is the difference between the public offering price ($62.50) and the net proceeds per share. $62.50 - $30,000,000 / 500,000 shares = $3.50 spread per share. 
IV. Merrel Bench is mentioned as the lead underwriter, but not as the sole book running manager. Therefore, this statement is incorrect. 
V. The involvement of 11 investment bankers, including the lead underwriter, indicates that this was a syndicated deal. Therefore, this statement is correct.

Ethanol Lawn Mowers Issued 500,000 Shares to the Public