Investment Banking
Separate primary and secondary IPO proceeds
A company announces a $120m IPO. How much money goes into its own bank account?
Primary shares raise money for the issuer. Secondary shares transfer proceeds to selling holders.
Issuer net proceeds = offer price × newly issued shares − issuer offering costs
New shares raise $80m for the issuer before costs; $40m from existing shares goes to sellers before their costs. Issuer net is $80m − $5m.
At $20, 4m new shares and 2m existing shares produce a $120m gross offering. With $5m issuer costs, the company receives $75m net.
New shares raise $80m for the issuer before costs; $40m from existing shares goes to sellers before their costs. Issuer net is $80m − $5m.
If 3m new shares are sold at the same price with $5m issuer costs, what does the company receive?