Chapter 17, Problem 17.31C

Summary Introduction

Case summary:

Company G is involved in the business of providing in-flight internet service. It has made a major strategical change in its approach as soon as it acquired a 10-year license from the Federal Communication Commission for in-flight internet services.

The company plans for international expansion as a part of its long-term plan which is most critical for generating profit. It signed an agreement with company D to install its equipment in 170 international planes.

The company entered an IPO in June 2013, raising $187 million with $17 per share. Within months the price of the stock fell to bottom hitting $10. The enormous technological cost resulted in the loss and in December 2016, the balance sheet has more liabilities than assets.

The company has made a big investment decision by improving its speed of service and started to penetrate deeper into the international market where the stocks of the company will increase.

To determine: The role of underwriters such as Company MS, Company JM in an IPO.