Reference no: EM132961171

Questions -

1. Yeti Holdings (YETI) and StoneCo Ltd (STNE) went public on October 25, 2018. Briefly describe each company based on information in their registration statement with the SEC. Describe the market reaction on opening day, why might we observe these price changes relative to the offer price. Assume a spread of 5%, direct costs of $1 million, and indirect costs of $425,000. What was the flotation cost as percent of equity raised for each IPO? Describe the winner's curse and how it might apply to these two IPOs. (specifically discuss expected profits if you were an uninformed investor and shares are rationed). What exchanges are these firms listed on? Compare and contrast the choice of exchanges relative to YETI and STNE.

2. You have a great idea for start-up and have been working nights and weekends on a prototype. You have the basic premise down but are running low on capital. Discuss the pros and cons of seeking out venture capital funding. How likely will you be able to receive funding? What will you look for in a VC? What are some alternatives to seeking out a VC?

3. Steve is the founder of George & Ketron. Recently, the firm decided to issue an IPO with Steve retaining 30 percent ownership of the firm. The IPO agreement contained both a Green Shoe provision and a 6-month lockup agreement. Steve's cost basis per share is $15. The offering price for the IPO was $16. On the first day of trading, the market price per share rose to $28.20 and closed for the day at $25.60. Now, six months after the IPO release, the stock is valued at $15.40 a share. Explain who benefited the most during the lockup period, an outside investor or Steve, and why?