“As an associate advising the board of a private industrial-technology company, you are tasked with comparing a traditional IPO against a de-SPAC merger: quantify how much cash each route actually delivers to the company, how much of the business existing shareholders keep, and what each route truly costs once the IPO discount and the sponsor promote are counted.”
As an associate advising the board of a private industrial-technology company, you are tasked with comparing a traditional IPO against a de-SPAC merger: quantify how much cash each route actually delivers to the company, how much of the business existing shareholders keep, and what each route truly costs once the IPO discount and the sponsor promote are counted.
Task: Determine which of the two listing routes leaves the existing shareholders of NordVolt Systems better off, and be able to explain what drives the difference.
NordVolt Systems is a privately held industrial-technology group that needs roughly $200m of primary capital together with a public listing, and both a traditional IPO and a de-SPAC merger are on the table.
| Line Item | Value |
|---|---|
| Pre-money equity value (standalone) | $800.0m |
| Existing shares outstanding | 80.0m |
| Route A — Traditional IPO | |
| Primary shares offered | 25.0m |
| IPO discount to fair value | 15% (0.15) |
| Underwriting fee (gross spread) | 6.0% (0.06) of gross proceeds |
| Other offering costs (legal, audit, listing) | $6.25m |
| Route B — De-SPAC Merger | |
| SPAC trust size | $230.0m |
| SPAC public shares | 23.0m at $10.00 |
| Sponsor founder shares (promote) | 5.75m |
| Redemption rate at the shareholder vote | 85% (0.85) |
| PIPE proceeds | $150.0m at $10.00 |
| Deferred underwriting fee | 3.5% (0.035) of trust size |
| Other transaction costs (advisory, legal, D&O) | $16.95m |
| Rollover shares issued to existing holders | 80.0m |
Fair Value per Share = Pre-Money Equity Value / Existing Shares
Offer Price = Fair Value per Share × (1 - IPO Discount)
Gross Proceeds = Primary Shares Offered × Offer Price
Net Proceeds = Gross Proceeds - Underwriting Fee - Other Offering Costs
Using these formulas, compute the offer price, the gross proceeds and the net primary proceeds of the IPO route.
Pro-Forma Shares = Existing Shares + Primary Shares Offered
Post-Money Equity Value = Pre-Money Equity Value + Net Proceeds
Value per Share = Post-Money Equity Value / Pro-Forma Shares
Using these formulas, compute the pro-forma share count, the post-money equity value and the resulting value per share under the IPO route, then state what percentage of the company existing holders retain.
Trust Cash Retained = Trust Size × (1 - Redemption Rate)
Transaction Costs = Deferred Underwriting Fee + Other Transaction Costs
Net Cash to Company = Trust Cash Retained + PIPE Proceeds - Transaction Costs
Using these formulas, compute how much cash the de-SPAC route actually delivers to NordVolt Systems.
Public Shares Retained = SPAC Public Shares × (1 - Redemption Rate)
Pro-Forma Shares = Rollover Shares + Public Shares Retained + Sponsor Founder Shares + PIPE Shares
Value per Share = (Pre-Money Equity Value + Net Cash to Company) / Pro-Forma Shares
Using these formulas, compute the pro-forma share count and the value per share under the de-SPAC route, then state what percentage of the company existing holders retain.
IPO All-In Cost = Underwriting Fee + Other Offering Costs + [Primary Shares × (Fair Value per Share - Offer Price)]
De-SPAC All-In Cost = Transaction Costs + (Sponsor Founder Shares × Pro-Forma Value per Share)
Cost Ratio = All-In Cost / Net Cash Delivered
Assume:
Using these inputs, compute the all-in cost and the cost ratio of each route, then state which route leaves existing shareholders better off.
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