Question

ABC Corporation stock is being sold in a primary offering. The total offering is $10,000,000, of which $7,000,000 is allocated to the syndicate and $3,000,000 is allocated to the selling group. The public offering price is set at $10.00 per share. The issuer received $9.00 per share from the underwriters. The management fee has been set at $.10 per share; the selling concession is $.30 per share. A syndicate member sells to a selling group member. How much will the syndicate member earn per share?

Answer 1

The syndicate member will earn $0.60 per stock

Step-by-step explanation:

The syndicate member will receive the stock with a basis of $9.10 per stock, $9 for ABC plus $0.10 management fee. The syndicate member resells the stock at $10 each, but must give a $0.30 concession to the selling group.

Earnings per stock = $10 - $9.10 - $0.30 = $0.60 per stock