Look at the illustrative new-issue prospectus. a. Is this issue a primary offering, a secondary offering, or both? b. What are the direct costs of the issue as a percentage of the total proceeds? c. Are these direct costs more than the average for an issue of this size? d. Suppose that on the first day of trading the price of Hotch Pot stock is $15 a share. What are the total costs of the issue as a percentage of the market price? e. After paying her share of the expenses, how much will the firm’s president, Emma Lucullus, receive from the sale? f. What will be the value of the shares that Emma Lucullus retains in the company? I am not sure how to attacah the Prospectus beacuse how large the appendix is. I've included what I can below, please let me know if further information is needed. I have the answers for A and C but am stuck on the rest.
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
Look at the illustrative new-issue prospectus.
a. Is this issue a primary offering, a secondary offering, or both?
b. What are the direct costs of the issue as a percentage of the total proceeds?
c. Are these direct costs more than the average for an issue of this size?
d. Suppose that on the first day of trading the price of Hotch Pot stock is $15 a share. What are the total costs of the issue as a percentage of the market price?
e. After paying her share of the expenses, how much will the firm’s president, Emma Lucullus, receive from the sale?
f. What will be the value of the shares that Emma Lucullus retains in the company?
I am not sure how to attacah the Prospectus beacuse how large the appendix is. I've included what I can below, please let me know if further information is needed. I have the answers for A and C but am stuck on the rest.
Prospectus
800,000 Shares
Hotch Pot Inc.
Common Stock ($.01 par value)
Of the 800,000 shares of Common Stock offered hereby, 500,000 shares are being sold by the Company and 300,000 shares are being sold by the Selling Stockholders. See “Principal and Selling
Stockholders.” The Company will not receive any of the proceeds from the sale of shares by the Selling Stockholders.
Before this offering there has been no public market for the Common Stock. These securities
involve a high degree of risk. See “Certain Factors.”
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Public
Underwriting
Discount
Proceeds to
Company*
Proceeds to Selling
Shareholders†
Per share $12.00 $1.30 $10.70 $10.70
Total† $9,600,000 $1,040,000 $5,350,000 $3,210,000
* Before deducting expenses payable by the Company estimated at $400,000, of which $250,000 will be paid by the
Company and $150,000 by the Selling Stockholders.
† The Company and the Selling Shareholders have granted to the Underwriters options to purchase up to 120,000
additional shares at the initial public offering price less the underwriting discount, solely to cover overallotment.
The Common Stock is offered, subject to prior sale, when, as, and if delivered to and accepted by
the Underwriters and subject to approval of certain legal matters by their counsel and by counsel for
the Company and the Selling Shareholders. The Underwriters reserve the right to withdraw, cancel,
or modify such offer and reject orders in whole or in part.
Silverman Pinch Inc. April 1, 2019
No person has been authorized to give any information or to make any representations, other than as
contained therein, in connection with the offer contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon. This Prospectus does not constitute an
offer of any securities other than the registered securities to which it relates or an offer to any person
in any jurisdiction where such an offer would be unlawful. The delivery of this Prospectus at any
time does not imply that information herein is correct as of any time subsequent to its date.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Prospectus Summary
The following summary information is qualified in its entirety by the detailed information and financial statements appearing elsewhere in this Prospectus.
The Company: Hotch Pot Inc. operates a chain of 140 fast-food outlets in the United States offering unusual combinations of dishes.
APPENDIX
10 Real prospectuses would be much longer than our simple example.
bre13960_ch15_440-465.indd 461 29/10/18 5:38 pm
FIRST PAGES
462 Part Four Financing
The Offering: Common Stock offered by the Company 500,000 shares; Common Stock offered
by the Selling Stockholders 300,000 shares; Common Stock to be outstanding after this offering 3,500,000 shares.
Use of Proceeds: For the construction of new restaurants and to provide working capital.
The Company
Hotch Pot Inc. operates a chain of 140 fast-food outlets in Illinois, Pennsylvania, and Ohio. These
restaurants specialize in offering an unusual combination of foreign dishes.
The Company was organized in Delaware in 2009.
Capitalization
The following table sets forth the capitalization of the Company as of December 31, 2018, and as
adjusted to reflect the sale of 500,000 shares of Common Stock by the Company.
Actual As Adjusted
(in thousands)
Long-term debt $ — $ —
Common stock—$.01 par value, 3,000,000 shares
outstanding, 3,500,000 shares outstanding, as adjusted
Paid-in capital 1,970 7,315
Retained earnings 3,200 3,200
Total stockholders’ equity $5,200 $10,550
Total capitalization $5,200 $10,550
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