Question 11CloudData needs help pricing their IPO. There are 6 million shares to be offered, and informed investors candistinguish between 150 million high value firms (30% probability) and 50 million low value firms (70%probability). Informed investors request 2 million shares if high value.Uninformed investors always request 6 million shares because they cannot distinguish quality. What shouldbe the Offering Price assuming allocation of shares proportional to petition (no book-building) and requiringfor uninformed investors to break even?12.39O 20.3110.3215.87

There isn't a specific formula to calculate the IPO price needed for a company to break even. It…

Answered: Question 11 CloudData needs help…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter18: Public And Private Financing: Initial Offerings, Seasoned Offerings, Investment Banks

Section: Chapter Questions

Problem 6SP

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CloudData needs help pricing their IPO. There are 6 million shares to be offered, and informed investors can distinguish between 150 million high value firms (30% probability) and 50 million low value firms (70% probability). Informed investors request 2 million shares if high value. Uninformed investors always request 6 million shares because they cannot distinguish quality. What should be the Offering Price assuming allocation of shares proportional to petition (no book-building) and requiring for uninformed investors to break even? 12.39 20.31 10.32 15.87
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