Sign up  |  Log in

Equity - IPO question

[question removed by moderator]

"Using Wiley for my CFA journey was by far the best option… I was able to pass on my first attempt.”– Moe E., Canada

If I understand correctly (please correct me if I am wrong), the total amount raised ($265M) represents the sum of ALL the proceeds of the IPO that are earned by anyone who owned a piece of the company before the IPO. Thus, this also includes the shares of the company’s founders (say when the company was founded, the founder’s great aunt contributed capital as an angel investor and she owns 3% of the company).

When the company’s founders sell their part of the company, those sales’ proceeds go into their pocket and are not available to the company anymore (so the 3% of the great aunt goes back under her mattress and is not available to the company).

Regarding the amound of issued shares, this is my understanding of the process (again, please correct me if I am wrong):

“On 28 March 2006, Playtech raised approximately £265 million gross through an initial public offering of 103,142,466 ordinary shares at £2.57 per ordinary share. After the initial public offering, Playtech had 213,333,333 ordinary shares issued and outstanding.”

The IPO of 101,142,466 ordinary shares included:

1) The company’s shares

and

2) Shares of some of the owners (including the great aunt)

Given that we know that the company’s proceeds were $34.3M and the share price is $2.57 we can calculate that the company issued and sold approx. 13M shares and the remaining shares must have been sold by the owners (103M-13M=90M).

Next, we know that overall the company had 213M shares issued and outstanding after the IPO, and 13 were sold as part of the IPO by the company itself, the remaining shares (200M) must have been sold at some point before IPO (to angel investors or the owners contributions etc.). The owners sold 90M (90/200)and thus 45% of their part of the company.

Thank you very much. I got it now. The key is differentiating between what number of shares belong to the Playtech/the company, and what belongs to its founder.

You are welcome.

Are t he 13.3M the result of overallotment?