What is the cost to the current owners of going public

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Assume that you work for an investment bank and you are trying to price an IPO. You estimate that the pre-IPO intrinsic value of the enterprise is $90 million (the company has no debt) and there are 10 million shares outstanding. The company is attempting to issue an additional 10 million shares. You estimate an underwriter spread will need to be 5% and you assume that in order to have the stock offering fully subscribed you will need to place about 25% of the offering with retail investors. What do you recommend for an offer price? Given your recommended offer price, what is the cost to the current owners of going public?

Reference no: EM131949668

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