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What will be the proceeds to the founder

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Reference no: EM132538216

Tutorial Exercise - Initial Public Offering

Siddle & Simmonds Ltd is planning an IPO. The company is currently owned by the founder who wants to end up with 70% of the shares afterwards. The company is looking to raise £12 million of new capital to fund expansion.

The Board have chosen an investment bank to lead the offering. The bank attributes a value of £38 million to the company which has net debt of £2 million.

The company has £6 million of share capital before the IPO, made up of 5p shares. In the face of difficult market conditions in the weeks before the IPO, the bank recommends a discount of 20% in the IPO.

Question 1: How many shares has the company issued before the IPO?

Question 2: What will be the issue price?

Question 3: How many new shares will be issued?

Question 4: After the new shares have been issued and the original investors have reduced their stake how many shares will the founder have?

Question 5: What will be the proceeds to the founder?

Question 6 : Why might it be in the interests of the bank to recommend a high discount in the IPO?

Reference no: EM132538216

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