Question

On January​ 20,

MetropolitanMetropolitan

Inc. sold

1010

million shares of stock in an SEO. The market price of

MetropolitanMetropolitan

at the time was

$ 42.00$42.00

per share. Of the

1010

million shares​ sold,

55

million shares were primary shares being sold by the​ company, and the remaining

55

million shares were being sold by the venture capital investors. Assume the underwriter charges

5.5 %5.5%

of the gross proceeds as an underwriting fee.

a.	How much money did MetropolitanMetropolitan ​raise?
b.	How much money did the venture capitalists​ receive?
c.	If the stock price dropped 3.7 %3.7% on the announcement of the SEO and the new shares were sold at that​ price, how much money would MetropolitanMetropolitan ​receive?

Answer 1

a.
Total amount raised by Metropolitan	(10 million shares*$42 share price)*(1-0.055)
Total amount raised by Metropolitan	$396.90	million
b.
Amount raised by venture capitalist	(5 million shares*$42 share price)*(1-0.055)
Amount raised by venture capitalist	$198.45	million
c.
Share price after drop	42*(1-0.037)
Share price after drop	$40.45
Total amount received by Metropolitan	(10 million shares*$40.45 share price)*(1-0.055)
Total amount received by Metropolitan	$382.21	million