Q3 Advent PLC plans to obtain a listing on the London Stock Exchange. As part of this process, the company wants to concurrently raise approximately 3 million. Having received advice, it plans to do this using an offer for sale Information on the estimated costs associated with the issue are given below: 05% Issuing house commission Underwriting commission Accounting and legales Multiple page ad in national newspaper Share registration costs Stock exchange initial fee Other costs 1.5% E75.000 100.000 1,000 plus 2 per shareholder C10.000 40000 a) Estimate the total issue costs using the above information (but excluding share registration costs). if Advent PLC was to go ahead with this offer for sale. [2 marks] Its Investment bank recommends using an offer for sale by tender and is willing to underwrite a tender issue of 2 milion shares at 140p per share. Advent PLC agrees to the suggestion and subsequently receives the following tenders Price tendered (pence) Number of applicants at the price 127 Number of shares bid at the price 22.000 74 000 192.000 724 000 928.000 1324200 4956000 12230.000 410 1123 155 3520 6410 140 b) Assuming - The maximum strike price is set The company decides to allocate shares to those successful tenders in proportion to the shares that the rested Costs are as previously estimated except The issuing house commission rate is increased to 0.75% of the gross target amount to be raised which remains unchanged) The underwriting commission rate of 15% (which is unchanged) is applied to the maximum underwriting exposure based on the minimum share price (as given in the sender det Estimate the amount of funds that the company will raise from the tender, net of total costs, and the average size of shareholding that this will create (4 marks] c) State the main advantage to Advent PLC of raising money via an offer for sale by tender [1 mark] d) Outline the disadvantages of using an offer for sale by tender instead of an offer for sale at a fixed price 14 marks] [Total 11 marks) Q3 Advent PLC plans to obtain a listing on the London Stock Exchange. As part of this process, the company wants to concurrently raise approximately 3 million. Having received advice, it plans to do this using an offer for sale Information on the estimated costs associated with the issue are given below: 05% Issuing house commission Underwriting commission Accounting and legales Multiple page ad in national newspaper Share registration costs Stock exchange initial fee Other costs 1.5% E75.000 100.000 1,000 plus 2 per shareholder C10.000 40000 a) Estimate the total issue costs using the above information (but excluding share registration costs). if Advent PLC was to go ahead with this offer for sale. [2 marks] Its Investment bank recommends using an offer for sale by tender and is willing to underwrite a tender issue of 2 milion shares at 140p per share. Advent PLC agrees to the suggestion and subsequently receives the following tenders Price tendered (pence) Number of applicants at the price 127 Number of shares bid at the price 22.000 74 000 192.000 724 000 928.000 1324200 4956000 12230.000 410 1123 155 3520 6410 140 b) Assuming - The maximum strike price is set The company decides to allocate shares to those successful tenders in proportion to the shares that the rested Costs are as previously estimated except The issuing house commission rate is increased to 0.75% of the gross target amount to be raised which remains unchanged) The underwriting commission rate of 15% (which is unchanged) is applied to the maximum underwriting exposure based on the minimum share price (as given in the sender det Estimate the amount of funds that the company will raise from the tender, net of total costs, and the average size of shareholding that this will create (4 marks] c) State the main advantage to Advent PLC of raising money via an offer for sale by tender [1 mark] d) Outline the disadvantages of using an offer for sale by tender instead of an offer for sale at a fixed price 14 marks] [Total 11 marks)
