3. More on the IPO process The IPO process involves several entities, such as the issuing company, institutional investors, brokers, lawyers, regulators, retail investors, and an intermediary company. Consider the following IPO deal: On August 10, 2012, Manchester United PLC (MANU), a professional soccer team in the English Premier League, went public with the sale of 16,666,667 shares of Class A ordinary common shares for $14 per share. The sale, which raised $233,333,338, was led by the Jeffries Group, Inc. and conducted with assistance from Credit Suisse Group AG and JP Morgan. A variety of other banks across the world participated in the sale by offering shares to their customers. Beginning on August 9, 2012, and running for two weeks, roadshows were conducted in the United States by one management team and across Europe and Asia by a second team of MANU executives. What was the purpose of the roadshows conducted by MANU's management and its investment bankers? To meet with investment bankers and negotiate the terms of the offering. To create and identify prospective investors and the number of shares they are willing to purchase at the issue's range of offering prices. The underwriter in the IPO process has several responsibilities. True or False: Underwriters sell IPO shares only to their institutional clients. True False True or False: Underwriters sell IPO shares only to their institutional clients. True False Assume that a stock-issuing firm has a choice between a private placement selling the shares for $25.00 per share or a best efforts offering that will sell all available shares at the prices described in the following probability distribution: Best efforts expected probability distribution Probability Selling price Lowest quoted price 35% $20.00 Mid-range price 35% $24.00 Highest quoted price 30% $28.00 Assuming that the issue is fully subscribed, or sold, which method would generate the most capital for the issuing firm? Private placement Best efforts sale