How to calculate the right number of shares to issue when going for an IPO?
Noemi asks:
When a company wants to raise money by going public, the basic question is how much money do they need. But going further, i am wondering how do they (and the investment bank they work with) decide upon a correct number of shares to issue. For instance: 10000$ = 1000 shares * 10$
10000$ = 100 shares * 100$ … and so on..
What’s best? 100 shares or 1000 shares? What factors are influencing that decision?
When a company wants to raise money by going public, the basic question is how much money do they need. But going further, i am wondering how do they (and the investment bank they work with) decide upon a correct number of shares to issue. For instance: 10000$ = 1000 shares * 10$
10000$ = 100 shares * 100$ … and so on..
What’s best? 100 shares or 1000 shares? What factors are influencing that decision?
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To issue?
I believe your investment banker would do that for you.
You question really doesn’t make sense…
“going for an IPO”?
If you are looking to “buy an IPO” (and YOU shouldn’t) You would not be issuing the shares. If you were the Corporation, you would hardly be asking the question here.
If this is some kind of an assignment, I strongly suggest you go back and do the required reading, ‘cuz you missed something big time!
Good Luck!
Very broad question so hopefully a very broad answer will cover it:
Look at it this way– how much capital do you want to raise, not what number of shares is right.
For example, if the company wants to generate 1 billion dollars and you are planning on offering the initial share price at 10 bucks, you will need to sell 100,000,000 shares.
The number of shares is irrelevant The question is what percentage of the firm do you want to offer and at what price.
Number of shares is irrelevant because there can be 1000 shares at $25; or 2500 shares at $10; its both the same.