Question

Pangeat Inc. planned to offer 3.5 mln shares at $14 in an IPO. A day before the offering their underwriters suggested to change the offer to 5 mln shares at $28. Pangeat Inc. had an IPO on August 8^th, 1998 -- 5 mln shares at $28 were offered (excluding the 15% overallotment). During the first day of trading, the price of the stock rose to a maximum of $73 and closed the day at $54. How much money did Pangeat ‘leave on the table’? For simplicity, disregard the overallotment shares and the underwriter’s spread.

Answer 1

cost of shares = no of shares *amount per share

initial IPO offer was 3.5 mln at 14$

=3,500,000*14

=49,000,000

a day before offering IPO was 5MLN at 28$

= 5,000,000*28

=1.4e8(140,000,000)

present day value at the end of the day is 54$

= 5,000,000*54

=2.7e8(270,000,000)

the value of money on the table

= 2.7e8-1.4e8

=1.3e8(130,000,000)

during the first day of trading pangeat inc earned 1.3e8 $ profit aftrer diregarding the overallotment as mentioned above.

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