Question: You are the owner of a small and successful firm with an estimated market value of $ 50 million. You are considering going public.
a. What are the considerations you would have in choosing an investment banker?
b. You want to raise $ 20 million in new financing, which you plan to reinvest back in the firm. (The estimated market value of $ 50 million is based upon the assumption that this $20 million is reinvested.) What proportion of the firm would you have to sell in the initial public offering to raise $ 20 million?
c. How would your answer to (b) change if the investment banker plans to under price your offering by 10%?
d. If you wanted your stock to trade in the $20-$25 range, how many shares would you have to create? How many shares would you have to issue?