IPO Costs. Look at the illustrative new issue prospectus in the appendix.

a. Is this issue a primary offering, a secondary offering, or both?

b. What are the direct costs of the issue as a percentage of the total proceeds? Are these more than the average for an issue of this size?

c. Suppose that on the first day of trading the price of Hotch Pot stock is $15 a share. What are the total costs of the issue as a percentage of the market price?

d. After paying her share of the expenses, how much will the firm’s president, Emma Lucullus, receive from the sale? What will be the value of the shares that she retains in the company?