1
2
3
4
5
6
7
Stock price before IPO = PPre-IPO = $17.50
Total value after the IPO = VPost-IPO = $240 million
Gross proceeds = $32.258 million
12
13
14
15
16
17
18
19
20
23
24
29
30
31
36
37
38
A B C D E F G H I
Build a Model Solution 11/26/2018
Chapter: 18
Problem: 6
Inputs
Value of operations (VPre-IPO)$210 million
Number of existing shares (nExisting)12 million
Target net proceeds $30 million
Flotation costs (F) 7%
d. How many new shares must be sold in the IPO to provide the percentage of ownership required by the new shareholders? How many
total shares will be outstanding after the IPO?
Lingadalli Corporation (LC) is condsidering an IPO. LC has 12 million shares of common stock owned by its founder and early investors.
LC has no preferred stock, debt, or short-term investments. Based on its free cash flow projection, LC’s intrinsic value of operations is
c. What is projected total value of LC immediately after the IPO? Based on the total amount paid by the shareholders purchasing new
shares in the IPO, what percentage of the total post-IPO value do you think the new shareholders require to justify their stock purchases?
a. What is the intrinsic stock price per share before the IPO?
b. Given the target net proceeds, what amount of gross proceeds are required?
11
Offer price = POffer = $17.31
39
45
46
50
51
52
53
54
55
56
57
58
A B C D E F G H I
Price per share after the IPO = PPost-IPO = $17.31
e. Based on number of new shares sold in the IPO and the total amount paid by the new shareholders, what is the offer price?
d. How many new shares must be sold in the IPO to provide the percentage of ownership required by the new shareholders? How many
total shares will be outstanding after the IPO?
f. Based on total value of the company after the IPO and the total number of outstanding shares after the IPO, what is the intrinsic price
per share after the IPO?
g. Compare the pre-IPO price, the offer price, and the post-IPO price. Explain why they are similar of different. (No calculations are
required.)
Number of new shares = nNew = 1.863 million