Question

Assume Sybase Software is thinking about three different size offerings for issuance of additional shares.

Size of Offer Public Price Net to Corporation

a. 1.1 million................. \(30 \)27.50

b. 7.0 million…………… \(30 \)28.44

c. 28.0 million………… \(30 \)29.15

What is the percentage underwriting spread for each size offer?

Short answer

Percentage underwriting spread for offer:

1. 8.33%
2. 5.2%
3. 2.83%

Step-by-step solution

Computation of percentage underwriting spread for offer a

Offer a.

$$\begin{gathered} Spread=Publicprice-Nettocorporation \\ =\$30-\$27.50 \\ =\$2.50 \\ Percentagespread=\frac{Spread}{Publicprice}\times 100 \\ =\frac{\$2.50}{\$30}\times 100 \\ =8.33\% \end{gathered}$$

Computation of percentage underwriting spread for offer b

Offer b.

$$\begin{gathered} Spread=Publicprice-Nettocorporation \\ =\$30-\$28.44 \\ =\$1.56 \\ Percentagespread=\frac{Spread}{Publicprice}\times 100 \\ =\frac{\$1.56}{\$30}\times 100 \\ =5.2\% \end{gathered}$$

Computation of percentage underwriting spread for offer c

Offer c.

$$\begin{gathered} Spread=Publicprice-Nettocorporation \\ =\$30-\$29.15 \\ =\$0.85 \\ Percentagespread=\frac{Spread}{Publicprice}\times 100 \\ =\frac{\$0.85}{\$30}\times 100 \\ =2.83\% \end{gathered}$$