Question
Romero, a family business operating in North Carolina, has grown to the point that expansion throughout the entire Southeast is feasible. The proposed expansion would
Romero, a family business operating in North Carolina, has grown to the point that expansion throughout the entire Southeast is feasible. The proposed expansion would require the firm to raise about $18.6 million in new capital. Because Romero currently has a debt ratio of 50% and because family members already have all their personal wealth invested in the company, the family would like to sell common stock to the public to raise the $18.6 million. However, the family wants to retain voting control. The estimated pre-IPO value of equity in the company is about $63 million and there are 4 million of existing shares of stock held by family members. The investment bank will charge a 7% spread.
1-To net $18.6 million what is the total value of stocks that must be sold ?
2- What percentage of shares will the new investors require ?
3- how many shares will the new investors require?
4- what is the estimated offer price per share ?
5- what is the total post IPO value of equity ?
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