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XYZ used an investment bank to do IPO. In IPO, XYZ sold 1 million shares at...

XYZ used an investment bank to do IPO. In IPO, XYZ sold 1 million shares at $61.7 each. The investment bank charged 7% spread. At the end of the 1st day of trading, XYZ stock price closed at $76.08. Calculate the total cost of IPO. That is, what is the sum of direct and indirect cost?

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Answer #1

No. of share issued = 1,000,000

Issue price per share = $61.70

Underwriting spread % = 7%

Underwriting cost per share (direct cost) = $4.319

Stock close price on 1st trade day = $76.08

Underpricing cost per share (indirect) = 76.08 - 61.70 = $14.38

Total sum of direct and indirect cost:

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