A Brazilian company called Netshoes completed its IPO on April 12, 2017, and listed on the NYSE. Netshoes sold 8,250,000 shares of stock to primary market investors at an IPO offer price of $18, with an underwriting dis-count of 6.5%. Secondary market investors, however, were paying only $16.10 per share for Netshoes’ 31,025,936 shares of stock outstanding.a. Calculate the total proceeds for Netshoes’ IPO.b. Calculate the dollar amount of the underwriting fee for Netshoes’ IPO.c. Calculate the net proceeds for Netshoes’ IPO.d. Calculate market capitalization for Netshoes’ outstanding stock.e. Calculate IPO underpricing for Netshoes’ IPO.f. Explain the IPO underpricing for Netshoes.

A Brazilian company called Netshoes completed its IPO on April 12, 2017, and listed on the NYSE. Netshoes sold 8,250,000 shares of stock to primary market investors at an IPO offer price of $18, with an underwriting dis-count of 6.5%. Secondary market investors, however, were paying only $16.10 per share for Netshoes’ 31,025,936 shares of stock outstanding.a. Calculate the total proceeds for Netshoes’ IPO.b. Calculate the dollar amount of the underwriting fee for Netshoes’ IPO.c. Calculate the net proceeds for Netshoes’ IPO.d. Calculate market capitalization for Netshoes’ outstanding stock.e. Calculate IPO underpricing for Netshoes’ IPO.f. Explain the IPO underpricing for Netshoes.

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter13: Corporations: Organization, Stock Transactions, And Dividends

Section: Chapter Questions

Problem 4CP

See similar textbooks

Similar questions

On April 13, 2017, Yext Inc. completed its IPO on the NYSE. Yext sold 10,500,000 shares of stock at an offer price of $11 with an underwriting discount of $0.77 per share. Yext’s closing stock price on the first day of trading on the secondary market was $13.41, and 85,489,470 shares were outstanding. a. Calculate the total proceeds for Yext’s IPO. b. Calculate the percentage underwriter discount. c. Calculate the dollar amount of the underwriting fee for Yext’s IPO. d. Calculate the net proceeds for Yext’s IPO. e. Calculate Yext’s IPO underpricing. f. Calculate Yext’s market capitalization
On January 4, 2016, Runyan Bakery paid $324 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery’s operations. Runyan chose the fair value option to account for this investment. Runyan received dividends of $2.00 per share on December 15, 2016, and Lavery reported net income of $160 million for the year ended December 31, 2016. The market value of Lavery’s common stock at December 31, 2016, was $31 per share. On the purchase date, the book value of Lavery’s net assets was $800 million and: a. The fair value of Lavery’s depreciable assets, with an average remaining useful life of six years, exceeded their book value by $80 million. b. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. Required: 1. Prepare all appropriate journal entries related to…
On January 4, 2016, Runyan Bakery paid $324 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery’s operations. Runyan received dividends of $2.00 per share on December 15, 2016, and Lavery reported net income of $160 million for the year ended December 31, 2016. The market value of Lavery’s common stock at December 31, 2016, was $31 per share. On the purchase date, the book value of Lavery’s net assets was $800 million and: a. The fair value of Lavery’s depreciable assets, with an average remaining useful life of six years, exceeded their book value by $80 million. b. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. Required: 1. Prepare all appropriate journal entries related to the investment during 2016, assuming Runyan accounts for this…
On April 27, 2018, DocuSign, a California company that provides technology to enable digital signatures on important documents, conducted its initial public offering (IPO) of common stock. In the primary market the company’s shares were priced at $29 per share, but after one day of trading on the Nasdaq, the share price closed at $39.73. The company sold 21.7 million shares in the offering. To what extent (in dollars and on a percentage basis) was DocuSign’s stock underpriced in its IPO? How much cash (before deducting fees to investment banks) did DocuSign raise? How much more would it have raised if the shares had not been underpriced?
C Limited is a stock broking firm in the business of buying and selling shares on the JSE (Johannesburg Securities Exchange) on behalf of its clients and on its own behalf. On 1 December 2015, C Limited bought, on its own account, 10 000 shares of D Limited when the market price was R40. The share price of D Limited rose drastically to R60 and on 31 March 2016, C Limited sold 5 000 of the D Limited shares. Assuming that the year-end of C Limited is 31 March each year and that the corporate tax rate is 28% for 2016 and that only 70% of capital gains are taxable, answer the questions that follow: What amount should be recorded as gain on fair value adjustment in the statement of profit or loss and other comprehensive income for the year ended 31 March 2016?
Mimi Corporation started business in 2007 by issuing 200,000 shares of P20 par common stock for P36 each. In 2012, 30,000 of these shares were purchased for P52 per share by Mimi Corporation and held as treasury stock. On June 15, 2013, these 30,000 shares were exchanged for a piece of property that had an assessed value of P810,000. Mimi's stock is actively traded and had a market price of P60 on June 15, 2013. The cost method is used to account for treasury stock. The amount of paid-in capital from treasury stock transactions resulting from the above events would be:
The Cheesecake Factory Incorporated is publicly held and had more than 93 million common shares outstanding as of the end of the 2016 fiscal year. The company has preferred stock authorized but did not have any preferred stock issued. During fiscal year 2016, The Cheesecake Factory declared and paid cash dividends of $0.88 per share, totaling approximately $42.3 million. During the same year, it purchased 2.9 million shares of its own common stock at an approximate cost of $146.5 million. What impact, if any, would the cash dividend have had on the company’s revenue and expenses during 2016? (Do not provide journal entries) (name the account, account type and whether it increased or decreased) On which financial statement(s) would the cash dividend be listed for 2016? What impact, if any, Would the purchase of common stock have had on the company’s assets, liabilities and equity during 2016? (Do not provide journal entries) (name the account, account type and whether it increased or…
For example, GoTo completes its IPO on April 12, 2022 and is listed on the IDX. GOTO released 40,615,056,000 shares at a selling price of Rp. 338/unit with an underwriting discount of 5%. Investors in the secondary market pay only Rp. 300 per share of GoTo's outstanding shares of 50,000,000,000. Calculate: a. Total proceeds and net proceeds for IPO GoTo b. How much does the underwriting fee cost? c. What is the market capitalization for the outstanding GoTo shares? d. Calculate IPO underpricing and explain IPO underpricing for GoTo
Adams Industries holds 40,000 shares of FedEx common stock. On December 31, 2015, and December 31, 2016, the market value of the stock is $95 and $100 per share, respectively. What is the appropriate reporting category for this investment and at what amount will it be reported in the 2016 balance sheet?
On September 28, 2017, Roku Inc. (NASDAQ: ROKU) concluded its initial public offering (IPO) of 15,900,000 shares of its Class A common stock and realized net proceeds of approximately $219,420,000. The par value per Class A common stock share is $0.0001. Assume that the market price on the issue date was $13.80 per share. Ignore underwriting and other expenses resulting from the IPO. Questions What is the impact on Roku's balance sheet from its IPO? Does this IPO have any direct impact on Roku's net income? On what section of Roku's statement of cash flows will the cash proceeds from the IPO appear? Will it be an increase or decrease in that section?
The following excerpt is from an article reported in the May 7, 2014, online issue of Bloomberg. (Blomberg) Ford Motor Co. (F) said it will repurchase $1.8 billion of its shares to reduce dilution from recent stock grants to executives. The par amount per share for Ford ’s common stock is $0.01. Paid-in capital—excess of par is $5.39 per share on average. The market price was $16. Required: 1. Suppose Ford reacquires 112 million shares through repurchase on the open market at $16 per share. Prepare the appropriate journal entry to record the purchase. Ford considers the shares it buys back to be treasury stock. 2. Suppose Ford considers the shares it buys back to be retired rather than treated as treasury stock. Prepare the appropriate journal entry to record the purchase. 3. What does the company mean by saying that the buyback will serve “to offset dilution from executive compensation”?
The Cheesecake Factory Incorporated is publicly held and had more than 93 million common shares outstanding as of the end of the 2016 fiscal year. The company has preferred stock authorized but did not have any preferred stock issued. During fiscal year 2016, The Cheesecake Factory declared and paid cash dividends of $0.88 per share, totaling approximately $42.3 million. During the same year, it purchased 2.9 million shres of its own common stock at an approximate cost of $146.5 million. 1. What impact, if any, would the cash dividend have had on the company’s assets, liabilities and equity during 2016? (Do not provide journal entries) (name the account, account type and whether it increased or decreased) 2. What impact, if any, would the cash dividend have had on the company’s revenue and expenses during 2016? (Do not provide journal entries) (name the account, account type and whether it increased or decreased) 3. On which financial statement(s) would the cash dividend be listed…