Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your investment banking client Uber is about to go public. You have gathered the following information concerning comparable companies whose stock is publicly traded: IPO
- Your investment banking client Uber is about to go public. You have gathered the following information concerning comparable companies whose stock is publicly traded:
IPO Pricing
Company | Price/Earnings Per Share | Price/Cash Flow Per Share | Price/Revenue Per Share | Price/Book |
A | 30 | 15 | 3.0 | 2.4 |
B | 20 | 11 | 2.6 | 2.0 |
C | 25 | 13 | 2.8 | 1.8 |
D | 35 | 17 | 3.1 | 1.7 |
E | 27 | 14 | 3.0 | 2.1 |
- Calculate the average values for each multiple.
- Using these average multiples estimate the implied price for Ubers shares assuming Ubers earnings per share are $0.50, cash flow per share are $1.00, revenue per share is $4.90, and book value per share is $7.10.
- Assuming all five companies are equally reliable comparables, estimate a fair value for Ubers shares assuming they are trading in the market.
- Deduct a 10% discount from this [freely traded] price to arrive at a price for Ubers IPO. What is the purpose behind the 10% discount?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started