Three years ago, you founded Outdoor Gear Co., a retailer specializing in the sale of equipment and clothing for outdoor activities such as hiking, skiing, and camping. So far, your company has gone through three funding rounds: Round Date Investor Shares Share Price ($) Series A Mar. 2010 You 800,000 1.75 Series B Jul. 2011 Angel Investors 1,200,000 2.00 Series C Oct. 2012 Venture Capital 2,500,000 2.75 It is now 2013, and you need to raise additional capital to expand your business. You have decided to take your firm public through an IPO. You would like to issue an additional 60 million new shares through this IPO. Assuming that your firm successfully completes its IPO, you forecast that 2013 net income will be $7.2 million. Your investment banker advises you that the prices of other recent IPOs have been set such that the P/E ratios based on 2013 forecasted earnings average 18.7. Assuming that your IPO is set at a price that implies a similar multiple, what will be your IPO price per share?
Three years ago, you founded Outdoor Gear Co., a retailer specializing in the sale of equipment and clothing for outdoor activities such as hiking, skiing, and camping. So far, your company has gone through three funding rounds: Round Date Investor Shares Share Price ($) Series A Mar. 2010 You 800,000 1.75 Series B Jul. 2011 Angel Investors 1,200,000 2.00 Series C Oct. 2012 Venture Capital 2,500,000 2.75 It is now 2013, and you need to raise additional capital to expand your business. You have decided to take your firm public through an IPO. You would like to issue an additional 60 million new shares through this IPO. Assuming that your firm successfully completes its IPO, you forecast that 2013 net income will be $7.2 million. Your investment banker advises you that the prices of other recent IPOs have been set such that the P/E ratios based on 2013 forecasted earnings average 18.7. Assuming that your IPO is set at a price that implies a similar multiple, what will be your IPO price per share?
Chapter8: Securities Law Considerations When Obtaining Venture Financing
Section: Chapter Questions
Problem 27DQ
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What will be the ipo price
Transcribed Image Text:Three years ago, you founded Outdoor Gear Co., a retailer specializing in the sale of equipment and
clothing for outdoor activities such as hiking, skiing, and camping. So far, your company has gone
through three funding rounds:
Round
Date
Investor
Shares
Share Price ($)
Series A Mar. 2010 You
800,000 1.75
Series B Jul. 2011
Angel Investors 1,200,000 2.00
Series C Oct. 2012 Venture Capital 2,500,000 2.75
It is now 2013, and you need to raise additional capital to expand your business. You have decided
to take your firm public through an IPO. You would like to issue an additional 60 million new shares
through this IPO. Assuming that your firm successfully completes its IPO, you forecast that 2013
net income will be $7.2 million.
Your investment banker advises you that the prices of other recent IPOs have been set such that
the P/E ratios based on 2013 forecasted earnings average 18.7. Assuming that your IPO is set at
a price that implies a similar multiple, what will be your IPO price per share?
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