Problem:
Stump, Inc., a technology firm in Prairie View, Texas, issues a $66 million IPO priced at $17 per share, and the offering price to the public is $22 per share. The firm's legal fees, SEC registration fees, and other administrative costs are $350,000. The firm's stock price increases 15 percent on the first day.
Required:
Question 1: What is the underpricing spread?
Question 2: What is the underpricing on this issue?
Question 3: What is the firm's total cost of issuing the securities?
Note: Provide support for rationale.