Art Deco Reproductions, Inc.: Financial Analysis
The first proposal is issuing the new shares to publics at $38, but right now the commission fee is $3, and the market price is $39, but the investment banker believe that the price will drop to $38 and the commission fee is $2 per share subscribed. To capitalize exact 20millions dollar, Art Deco reproductions need to issue 556,000 new shares in total. And the stock price will drop slightly. And the company need to pay the investment banker $1,112,000 for the commission fees.
There are some advantages selling shares to public. The stock price will not drop so much, compare with others proposal. The less new shares issued, the less share dilution, and one member of the Board of Directors think this proposal will allow for greater distribution of the stock throughout the market.
This proposal also has some disadvantages. The commission fees are the highest, compare with other proposal in the circumstances of all shares are subscribed. Issuing new shares to public will dilute the proportional ownership of the company. It also will dilute the voting right of the current shareholders. It also will give much more voting right to the outsiders. Issuing shares to public might also hurt the current shareholders’ loyalty.
There also some potential risk the company need to face in this proposal. The first one is the fluctuations of the market price, if the market price goes down under $38, the new issue shares cannot sold and it had to decrease to the market price, and the commission fees is $2 per share, which means the company cannot capitalized enough money and need to issue more shares and pay more commission fees to get the 20millions capitalize target.
The proposal 2 is the company offer rights to current shareholders and gives them at $36 per share, this price is lower than the current market price $39 per shares, but the commission fee will be $1.25 per share for every share subscribed, and any remain shares will purchased by Waugh & Company, which will
There are some advantages selling shares to public. The stock price will not drop so much, compare with others proposal. The less new shares issued, the less share dilution, and one member of the Board of Directors think this proposal will allow for greater distribution of the stock throughout the market.
This proposal also has some disadvantages. The commission fees are the highest, compare with other proposal in the circumstances of all shares are subscribed. Issuing new shares to public will dilute the proportional ownership of the company. It also will dilute the voting right of the current shareholders. It also will give much more voting right to the outsiders. Issuing shares to public might also hurt the current shareholders’ loyalty.
There also some potential risk the company need to face in this proposal. The first one is the fluctuations of the market price, if the market price goes down under $38, the new issue shares cannot sold and it had to decrease to the market price, and the commission fees is $2 per share, which means the company cannot capitalized enough money and need to issue more shares and pay more commission fees to get the 20millions capitalize target.
The proposal 2 is the company offer rights to current shareholders and gives them at $36 per share, this price is lower than the current market price $39 per shares, but the commission fee will be $1.25 per share for every share subscribed, and any remain shares will purchased by Waugh & Company, which will