An investment bank acquired 5M shares of company ABC in its initial offering for 20M euros, and it sold them to the public for a
An investment bank acquired 5M shares of company ABC in its initial offering for 20M euros, and it sold them to the public for a price of 5 euros per share. At the end of the first day of trading, those shares were listed at 10 euros per share. The company did not pay the insurance bank any other costs.
Required
a. Determine the margin made by the bank per each share
b. Determine the under pricing (in value and in percentage)
c. Determine the total costs of this issue as a function of the market value of shares.
Step by Step Solution
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Step: 1
a The investment bank bought 5 million shares of ABC for 20 million euros so the cost per share was ...
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Authors: Sheridan Titman, John D. Martin
3rd edition
133479528, 978-0133479522
