Hughes Technology Corp. recently went public with an initial public offering in

Question

Hughes Technology Corp. recently went public with an initial public offering in which it received a total of $62.15 million in new capital funding. The underwriter used a firm commitment offering in which the offer price was $17.65 and the underwriter

Hughes Technology Corp. recently went public with an initial public offering in which it received a total of $62.15 million in new capital funding. The underwriter used a firm commitment offering in which the offer price was $17.65 and the underwriter

Explanation / Answer

To calculate the number of shares issued through this IPO, we need to use the offer price after making adjustment for underwriter's spread and total value received through the issue after making adjustment for legal and other administrative costs. Relevant formulas are:

Net Proceeds Received Per Share = Offer Price - Underwriter's Spread

Total Value Raised (Including Adjustment for Legal and Administrative Expenses) = Total Amount Raised + Legal and Other Administrative Costs

Number of Shares Issued = Total Value Raised (Including Legal and Administrative Expenses)/Net Proceeds Received Per Share

____________

Solution:

Using the information provided in the question, we get,

Net Proceeds Per Share = $17.65 - $1.50 = $16.15

Total Amount Raised (Including Adjustment for Legal and Administrative Expenses) = $62,150,000 + $2,450,000 = $64,600,000

_____________

Number of Share Issued = $64,600,000/$16.15 = 4,000,000 shares

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