eBook Problem 10 03 A company is going public at $20 and will use the ticker XYZ The underwriters will charge a 7 percent spread The company is issuing 19 million shares, and insiders will continue to hold an additional 38 million shares that will not be part of the IPO The company will also pay $1 million of audit fees, $1 5 million of legal fees, and $400,000 of printing fees The stock closes the first day at $24 Now the company grants a 15 percent overallotment option to the underwriter The underwriter issues shares that are backed by the entire overallotment option but has not yet exercised the option Explain what will happen if the price of the stock increases to $26 00 Describe the underwriter profits from the overallotment option in your explanation Enter your answer in millions For example, an answer of $1 23 million should be entered as 1 23, not 1,230,000 Do not round intermediate calculations Round your answer to two decimal places If the stock price increases to $26 00 in the secondary market, the underwriter Select willwill notItem 1 exercise its option and the underwriter profit will be $ million Explain what will happen if the price of the stock decreases to $17 00 Describe the underwriter profits from the overallotment option in your explanation Enter your answer in millions For example, an answer of $1 23 million should be entered as 1 23, not 1,230,000 Do not round intermediate calculations Round your answer to two decimal places If the stock price decreases to $17 00 in the secondary market, the underwriter Select willwill notItem 3 exercise its option and the underwriter profit will be $ million

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eBook Problem 10-03 A company is going public at $20 and will use the ticker XYZ. The underwriters will charge a 7 percent spread. The

eBook

Problem 10-03

A company is going public at $20 and will use the ticker XYZ. The underwriters will charge a 7 percent spread. The company is issuing 19 million shares, and insiders will continue to hold an additional 38 million shares that will not be part of the IPO. The company will also pay $1 million of audit fees, $1.5 million of legal fees, and $400,000 of printing fees. The stock closes the first day at $24. Now the company grants a 15 percent overallotment option to the underwriter. The underwriter issues shares that are backed by the entire overallotment option but has not yet exercised the option.

Explain what will happen if the price of the stock increases to $26.00. Describe the underwriter profits from the overallotment option in your explanation. Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Do not round intermediate calculations. Round your answer to two decimal places.

If the stock price increases to $26.00 in the secondary market, the underwriter -Select-willwill notItem 1 exercise its option and the underwriter profit will be $ million.
Explain what will happen if the price of the stock decreases to $17.00. Describe the underwriter profits from the overallotment option in your explanation. Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Do not round intermediate calculations. Round your answer to two decimal places.

If the stock price decreases to $17.00 in the secondary market, the underwriter -Select-willwill notItem 3 exercise its option and the underwriter profit will be $ million.