ADMS 3530 Chapter Notes - Chapter 7: Initial Public Offering, Seasoned Equity Offering, Dividend Yield

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carmineraccoon724

27 Apr 2019

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York University

Department

Administrative Studies

Course

ADMS 3530

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Common stock (common equity or common shares): ownership shares in a corporation. Large firms sell or issue shares to the public to raise money. Entitled to the firm"s residual cash flow (anything after paying off employees and all) Primary market: market for the sale of new securities issued by corporations. Initial public offering (ipo): first offering of stock to the general public (selling for the first time) Seasoned equity offering (seo): sale of additional stock by a public company. Secondary markets: markets in which already issued securities are traded among investors (stock market). Price-earnings multiple (p/e ratio): ratio of stock price to earnings per share. Dividend yield: a stock"s cash dividend divided by its current price. Tells you how much dividend income you would receive for every invested in the stock. Preferred stock: stock that takes priority over common stock in regard to dividends. Book value of equity: net worth of the firm according to the balance sheet.

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Multigrain Health Foods Inc. is authorized to issue 5,000,000common shares. In its initial public offering during 2010,Multigrain issued 500,000 common shares for $7.00 per share. Overthe next year, Multigrainâs share price increased and the companyissued 400,000 more shares at an average price of $8.50.

During the next seven years, from 2010 to 2016, Multigrainearned net income of $920,000 and declared and paid cash dividendsof $140,000. A 10% stock dividend was distributed to theshareholders in 2016 on the shares outstanding. The market pricewas $8.00 per share when the stock dividend was distributed. AtDecember 31, 2016, the company has total assets of $14,500,000 andtotal liabilities of $6,820,000.

Show the computation of Multigrainâs total shareholdersâequity at December 31, 2016. Present a detailed computation of eachelement of shareholderâs equity.

goldfox277

MuleSoft, Inc. conducted its IP on March 17, 2017 for theprinciple purposes of increasing its capitalization and financialflexibility, creating a public market for its Class A common stock,and enabling access to the public equity markets for it and itsstockholders. MuleSoft sold 13 million shares for an IPO offer of$17 per share. The underwriting discoung was $1.19 per share.MuleSoft intends to use the net proceeds from the offering to thefirm for general corporate purposes, such as working capital,operating expenses, capital expenditures, and to possibly acquirecomplementary businesses, products, services or technologies.MuleSoft's closing stock price was $24.75 after the first day oftrading on the NYSE and there were 125,991,557 shares of stockoutstanding.

Create a spreadsheet to conduct an analysis of MuleSoft's IPOand determine the following:

a) Calculate the total proceeds for MuleSoft's IPO.

b) Calculate the percentage underwriter discount for MuleSoft'sIPO.

c) Calculate the dollar amount of the underwriting fee forMuleSoft's IPO.

d) calculate the net proceeds for MuleSoft's IPO.

e) Calculate the percentage IPO underpricing for MuleSoft'sIPO.

f) Calculate the market capitalization for MuleSoft's IPO afterthe first day of trading in the secondary market.

chocolategoose86

Should Firms That Go Public Engage in International Offerings?

POINT: Yes. When a U.S. firm issues stock to the public for the first time in an initial public offering (IPO), it is naturally concerned about whether it can place all of its shares at a reasonable price. It will be able to issue its stock at a higher price by attracting more investors. It will increase its demand by spreading the stock across countries. The higher the price at which it can issue stock, the lower is its cost of using equity capital. It can also establish a global name by spreading stock across countries.

COUNTER-POINT: No. If a U.S. firm spreads its stock across different countries at the time of the IPO, there will be less publicly-traded stock in the U.S. Thus, it will not have as much liquidity in the secondary market. Investors desire stocks that they can easily sell in the secondary market, which means that they require that the stocks have liquidity. To the extent that a firm reduces its liquidity in the U.S. by spreading its stock across countries, it may not attract sufficient U.S. demand for the stock in the U.S. Thus, its efforts to create global name recognition may reduce its name recognition in the U.S.

WHO IS CORRECT? Use the Internet to learn more about this issue. Which argument do you support?

indigobutterfly986

ADMS 3530 Chapter Notes - Chapter 7: Initial Public Offering, Seasoned Equity Offering, Dividend Yield

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