S&S Air Goes Public Mark Sexton and Todd Story have beendiscussing the future of...

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S&S Air Goes Public Mark Sexton and Todd Story have beendiscussing the future of S&S Air. The company has beenexperiencing fast growth, and the two see only clear skies in thecompany’s future. However, the fast growth can no longer be fundedby internal sources, so Mark and Todd have decided the time isright to take the company public. To this end, they have enteredinto discussions with the investment bank of Crowe & Mallard.The company has a working relationship with Renata Harper, theunderwriter who assisted with the company’s previous bond offering.Crowe & Mallard have assisted numerous small companies in theIPO process, so Mark and Todd feel confident with this choice.Renata begins by telling Mark and Todd about the process. AlthoughCrowe & Mallard charged an underwriter fee of 4 percent on thebond offering, the underwriter fee is 7 percent on all initialstock offerings of the size of S&S Air’s offering. Renata tellsMark and Todd that the company can expect to pay about $1,800,000in legal fees and expenses, $12,000 in SEC registration fees, and$15,000 in other filing fees. Additionally, to be listed on theNASDAQ, the company must pay $100,000. There are also transferagent fees of $6,500 and engraving expenses of $520,000. Thecompany should also expect to pay $110,000 for other expensesassociated with the IPO. Finally, Renata tells Mark and Todd thatto file with the SEC, the company must provide three years’ auditedfinancial statements. She is unsure about the costs of the audit.Mark tells Renata that the company provides audited financialstatements as part of the bond covenant, and the company pays$300,000 per year for the outside auditor.
This is the last question on the case study below!!!
d. 5 years after IPO, S&S Air is planning to raise freshequity capital by selling a large new issue of common stock.S&S Air is currently a publicly traded corporation, and it istrying to choose between an underwritten cash offer and a rightsoffering (not underwritten) to current shareholders. S&S Airmanagement is interested in minimizing the selling costs and hasasked you for advice on the choice of issue methods. What is yourrecommendation and why?

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4.4 Ratings (907 Votes)

The amount to be spent by company under both the options have been presented below Option 1 Underwritten cash offer Particulars Amount Underwriting fee 7 Legal fees and expenses 1800000 SEC registration fees 12000 Other filing fees 15000 Other expenses related to IPO 110000 Transfer See Answer

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In: AccountingS&S Air Goes Public Mark Sexton and Todd Story have beendiscussing the future of S&S...S&S Air Goes Public Mark Sexton and Todd Story have beendiscussing the future of S&S Air. The company has beenexperiencing fast growth, and the two see only clear skies in thecompany’s future. However, the fast growth can no longer be fundedby internal sources, so Mark and Todd have decided the time isright to take the company public. To this end, they have enteredinto discussions with the investment bank of Crowe & Mallard.The company has a working relationship with Renata Harper, theunderwriter who assisted with the company’s previous bond offering.Crowe & Mallard have assisted numerous small companies in theIPO process, so Mark and Todd feel confident with this choice.Renata begins by telling Mark and Todd about the process. AlthoughCrowe & Mallard charged an underwriter fee of 4 percent on thebond offering, the underwriter fee is 7 percent on all initialstock offerings of the size of S&S Air’s offering. Renata tellsMark and Todd that the company can expect to pay about $1,800,000in legal fees and expenses, $12,000 in SEC registration fees, and$15,000 in other filing fees. Additionally, to be listed on theNASDAQ, the company must pay $100,000. There are also transferagent fees of $6,500 and engraving expenses of $520,000. Thecompany should also expect to pay $110,000 for other expensesassociated with the IPO. Finally, Renata tells Mark and Todd thatto file with the SEC, the company must provide three years’ auditedfinancial statements. She is unsure about the costs of the audit.Mark tells Renata that the company provides audited financialstatements as part of the bond covenant, and the company pays$300,000 per year for the outside auditor.This is the last question on the case study below!!!d. 5 years after IPO, S&S Air is planning to raise freshequity capital by selling a large new issue of common stock.S&S Air is currently a publicly traded corporation, and it istrying to choose between an underwritten cash offer and a rightsoffering (not underwritten) to current shareholders. S&S Airmanagement is interested in minimizing the selling costs and hasasked you for advice on the choice of issue methods. What is yourrecommendation and why?