The dollar amount that is raised during an initial public offering (IPO) process. An issuer will be keen to maximize the expect IPO proceeds, while minimizing the risk associated with the offering. Companies usually disclose the intended uses of the proceeds in the prospectus (e.g., purchasing inventory, extending credit to customers, etc). The net IPO proceeds that will be available to the company are:
Net IPO proceeds = IPO proceeds – underwriter fees
For example, up to 7% of an IPO proceeds may go to the underwriters as a gross spread, and 3% may be used to pay for legal, accounting and similar costs, while the issuer keeps the remainder.
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