Pawnee internet company Gryzzl is preparing for an upcoming IPO. The firm wants $300 million in net proceeds to fund its drone delivery service and build a new corporate campus. Gryzzl's pre-IPO equity value is $1200 million (making it a unicorn firm), and it has 30 million shares outstanding.
If the underwriter will charge 7% to manage the offering, what is a suitable per-share IPO price? Round your answer to the nearest penny, e.g. 12.993 --> 12.99, 12.987 --> 12.99

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amcool amcool · Answer 1 · 2020-04-18T05:57:31+02:00

Answer:

$10.75

Explanation:

Amount required = Number of shares outstanding × Price per share × (1 - underwriter charge)

$300,000,000 = 30,000,000 × Price per share × (1 - 0.07)

Price per share = $300,000,000 ÷ (30,000,000 × 0.93) = $300,000,000 ÷ 27,900,000 = $10.75

Therefore, the suitable per-share IPO price is $10.75.

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andromache andromache · Answer 2 · 2022-04-12T10:47:00+02:00

The per share IPO price when the underwriter will charge 7% to manage the offering so it should be considered as the $10.75

First do the following calculations:

Since

Amount required = Number of shares outstanding × Price per share × (1 - underwriter charge)

$300,000,000 = 30,000,000 × Price per share × (1 - 0.07)

Now

Price per share = $300,000,000 ÷ (30,000,000 × 0.93)

= $300,000,000 ÷ 27,900,000

= $10.75

Therefore, the per-share IPO price is $10.75.

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