A company issues 1,025,000 new shares in a traditional IPO. On day one of trading, the share price closes at $128.75 per share. The company net proceeds (net of all costs of an IPO) amounted to $150 million with total underwriting and other costs of the IPO set at 1.5% of the gross proceeds raised in the IPO.

(a) What was the offer price at which IPO was initiated? Show all work.

(b) Did IPO go under- or over-pricing? What was the percent by which IPO go under- or over-pricing? Show all work.

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(c) Suppose, CEO of the company bought 50,000 shares pre-IPO at an 20% discount on the offer price. Did CEO make money or lost money at the end of the first trading day? How big was her gain or loss (in dollar amount and percentage terms). Show all work.

(d) If CEO made money in the above transaction, can she ‘cash in’ her gains? Explain your answer.

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