In the spinoff transaction, RBT would create shares of common stock for the subsidiary which would trade on the Nasdaq market under the ticker symbol ADS. There would be 13.72 million shares of stock outstanding, but in the initial IPO, RBT would sell only 2.72 million shares to the public, retaining the rest until the obtaining IRS approval to complete the spinoff in a tax-free transaction. That approval could take several months, but once it came, RBT would distribute the remaining 11 million ADS shares that it owned on a pro rata basis to holders of RBT common stock. There were 15.36 million common shares of RBT outstanding.

Demand for the ADS IPO was brisk, to say the least. ADS common shares were sold to IPO investors at $16 per share. Given the initial sale of 2.72 million shares, ADS raised $40.52 million, net of a $3 million fee paid to the IPO underwriters. On its first day as a public company, ADSs stock closed at $37.25. The same day, RBT stock closed at $23.50.

Below are balance sheets for ADS and RBT as they appeared just before the ADS IPO.

RBT Software Balance Sheet ($ 000s)
Cash	23,000	Payables	114,000
Receivables	60,000	Short-term debt	4,500
Inventory	67,500	Other current liab.	23,000
Other current assets	19,000	Long-term debt	300
PP&E	22,500	Stockholders equity	71,200
Long-term assets	21,000
Total assets	213,000	Total liab. plus equity	213,000

Bitcoin Excavation Accredited Research Balance Sheet ($ 000s)
Cash	50	Payables	7,200
Receivables	750	Short-term debt	0
Inventory	7,000	Other current liab.	1,300
Other current assets	15	Long-term debt	5,800
PP&E	450	Stockholders equity	-4,535
Long-term assets	1,500
Total assets	9,765	Total liab. plus equity	9,765

Flag question: Question 1

Make some adjustments to these balance sheets. To the extent possible, we want to express the value of assets, liabilities, and equity in market value terms. Assume that for both companies the book value of current assets, PP&E, and other long-term assets is the same as the market value. Make the same assumption for payables, other liabilities, and long-term debt.

RBT Software Balance Sheet ($ 000s)
Cash	23,000	Payables	114,000
Receivables	60,000	Short-term debt	4,500
Inventory	67,500	Other current liab.	23,000
Other current assets	19,000	Long-term debt	300
PP&E	22,500	Stockholders equity	71,200
Long-term assets	21,000
ADS stock held	???
Total assets		Total liab. plus equity

For RBT, recognize that after the IPO it owns a new asset with a market value that you can calculate directly by multiplying the current ADS share price after the IPO times the number of ADS shares that RBT still owns after the IPO. Use the closing price to determine this amount. Include this new asset on the left side of RBTs balance sheet.