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sir when a company is coming up with an IPO price per share, then what is it based on? MV of firm or MV of equity only?
so if a company has debt then it will be reduced from FCF to firm, to arrive at estimated MV of equity. Similarly if a company has no debt, then the FCF to firm will be equal to FCF to equity, right sir?
If a company is having an IPO then there will not be a current MV of the shares because the shares are currently not traded!
In deciding what price to issue the new shares, they will try and estimate what a ‘fair’ value will be after the issue based on what they intend to do with the money raised and therefore the future expectations. But they will also take into account other factors such as pricing so as to make the issue attractive.
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