ADMS 4540 Chapter Notes - Chapter 16: Initial Public Offering, Martha Stewart Living Omnimedia, Underwriting
4 Nov 2018
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Ipos & underpricing: determining offering price most difficult task of underwriter. If priced too high unsuccessful & withdrawn: priced below true mv issue(cid:396)"s e(cid:454)isti(cid:374)g h e(cid:454)pe(cid:396)ie(cid:374)(cid:272)e oppo(cid:396)tu(cid:374)it(cid:455) loss, underpricing fairly common helps new sh earn higher return / existing sh suffer loss. Ipo smith invests heavily in up ipo jones gets few of shares since allocate between smith & jones: ho(cid:449)e(cid:448)e(cid:396), (cid:373)ith does(cid:374)"t i(cid:374)(cid:448)est i(cid:374) op ipo . Ch 16 financial leverage & capital structure policy: the capital structure question, firm value & stock value: an example, ex. Lines intersect at point where eps same for both cas: calculate ebit p. 616 indifference point, eps = ebit-400000/200000, or check no debt line ebit 800,000 = ni 800000 = roe. Cas: table 16. 5 investor buys 2000$ of tn stock if proposed cas adopted (100 stocks) refer table 16. 4 eps= . 5, 3, 5. 5 earnings for 100 shares = 50$,
