Problem 15-12 IPO Costs (LO2) Match Group went public in November 2015. The comp

Question

Problem 15-12 IPO Costs (LO2) Match Group went public in November 2015. The company sold 16,833,333 shares at $15.8 per share. The underwriting spread was $2.56 a share, and the direct expenses were $0.40 a share. a. What was the percentage underwriting spread? (Round your final answers to 1 decimal place.) Underwriting spread percentage b. How much did the company raise after all expenses? (Enter your answer in dollars not millions. Round your answer to the nearest dollar.) Company raised c. On its first day of trading the stock closed at $20.44. Calculate the dollar cost of underpricing. (Enter your answer in dollars not millions. Round your answer to the nearest dollar.)

Explanation / Answer

a) Underwriting spread = 2.56 / 15.8 = 16.20%

b) Company raised = 16,833,333 x (15.8 - 2.56 - 0.4) = 216,139,996

c) Dollar cost of underpricing = 16,833,333 x (20.44 - 15.8) = 78,106,665

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