eBay, Inc., went public in September of 1998. The follow- ing information on shares outstanding was listed in the final prospectus filed with the SEC.4 In the IPO, eBay issued 3,500,000 new shares. The ini- tial price to the public was $18.00 per share. The final first- day closing price was $44.88.

1. If the investment bankers retained $1.26 per share as fees, what were the net proceeds to eBay? What was the market capitalization of the new shares of eBay?

2. Two common statistics in IPOs are underpricing and money left on the table. Underpricing is defined as percentage change between the offering price and the first day closing price. Money left on the table is the dif- ference between the first day closing price and the offering price, multiplied by the number of shares offered. Calculate the underpricing and money left on the table for eBay. What does this suggest about the efficiency of the IPO process?

3. The shares of Misheak, Inc., are expected to generate the following possible returns over the next 12 months:

Return (%) Probability 5 . 10 5 .25 10 . 30 15 .25 25 . 10

If the stock is currently trading at $25 per share, what is the expected price in one year? Assume that the stock pays no dividends.