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Hi Mr Moffat
Would you please advise if there is any typical way in determining the range of issue prices?
In Mercury, the dividend growth model is used to estimate the prices and the answer stated that the higher price (from the range) could be achieved (given some conditions say effective control retained) and a premium of 20%-50% will be even accepted by the PE investors.
However, in Mlima June 2013 question, there is a discussion on the issuing shares at a discount.
Although the context of the 2 questions are different, I am confused with the share prices suggestion.
Would you please help me in this area?
Thank you very much.
Hanhvn
I cannot give you any rules (because there are no rules 🙂 )
Essentially there is no precise way of deciding on an issue price. You need to look at whatever information is available, and make whatever calculations you are able to on the information (obviously, one method may be to use the dividend growth formula if you have the information; another method would be to find the PV of the free cash flow to equity if that is available; etc..).
The only reason for discussing issuing shares at a discount in the question Milma is that the question specifically asked for the discussion (otherwise I would not have mentioned it if I were answering the question).
The better of the two questions to learn from (especially with regard to the discussion of assumptions) is Milma, because it was set by the current examiner. (Mercury was set by the previous examiner).
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