|
||||||
|
||||||
|
Determination of Offering Price and Dilution
The SEC requires disclosure of how the offering price was determined. The following factors could determine the price: • Price given by public trading market • Net tangible book value per share or earnings per share • Stock prices of similar companies • Recent private stock sale prices • Maximum price investors willing to pay • Money required to fund company operations The SEC wants to know if a company used an arbitrary means to determine offering price since a stock price may not be related to assets, revenues, or profits. If no market analysis was performed to determine share price, indicate this to the SEC even if certain factors such as net tangible book value per share or earnings per share were considered. Dilution requirement information is applicable if a company is intending to raise money. To begin, a company must determine current net tangible value per share, (value of all assets on the balance sheet after liabilities and all intangible assets are subtracted). Company formation costs and any patents, copyrights, franchises, trademarks, operating rights, and goodwill are considered intangible assets. Tangible book value must be determined using the company’s most recent balance sheet prepared using generally accepted accounting principles (GAAP). To compute the net tangible book value per share of common stock, divide the total number of common shares outstanding prior to the offering by the net tangible book value using the most current balance sheet. When determining the number of outstanding shares, a company should consider shares issued between the date of the last balance sheet and time of the offering. Click on the sample calculation link for an example. |
|
|||||
|
© 2009 GoingPublicInformation.com. All rights reserved. | ||||||