1. In the DutchAuction the company would have to pay just the underwriter fee so she canconduct the auctions. In the general cash offering, the company would have topay the cost for the underwriter plus the underpricing cost, because they sellfor usually a lower price to the underwriter that will then sell it for ahigher price. So, underpricing happens with the General Cash offering, makingthe Dutch Auction a better option for the company to go public. (Underpricingcould still happen in Dutch Auction but not as likely).
2. The big advantageof raising the IPO to $90 million is that the company can raise extra cash,preventing them of having to go to the market again in the future. But the bigdisadvantage is that by doing so, the company will have extra money that it doesn’treally need, which can lead to bad management choices and spending of thatmoney. 3. Underwriter Fee= 7% Other Fees = $110,000 Legal Fees = $1,800,000 Trans. Agent Fee = $6,500 SEC Fees = $12,000 EngravingExpenses = $520,000 Filing Fees = $15,000 NADASQ Fee= $100,000 Amount/Raise= $75,000,000 Underwriter fee = 75,000,000*7% = $5,250,000 Sum of Fees 5,250,000+ 1,800,000 + 12,000 + 15,000 + 100,000 + 6,500 + 520,000 + 110,000 = $7,813,500 Funds Received = Amount to Raise – Underwriter Fee = 75,000,000 –5,250,000 = $69,750,000 IPO Cost = Total Fees/Funds Received =$7,813,500/$69,750,000 =0.
112 or 11.2% 4. If the employees sell their share on the firstoffering, they might lose some money due to underpricing. But if they decidenot to sell it the first time, they might have to wait up to 180 days for thecalled “lockup period”. And it is possible that after the first offering theprices will have dropped. So, it is really up to the employee to decide whichoption he would prefer.