Luther Industries is in the process of selling shares of stock in an auction IPO. At the end of the bidding period, Luther's investment bank has received the following bids: What will the offer price of these shares be if Luther is selling 1 million shares?

Question

Luther Industries is in the process of selling shares of stock in an auction IPO. At the end of the bidding period, Luther's investment bank has received the following bids:  What will the offer price of these shares be if Luther is selling 1 million shares?

Quizplus · Accepted Answer

To determine the offer price, we need to find the highest bid that will allow Luther to sell 1 million shares. The bids in the table are already sorted from highest to lowest. Adding up the first 6 bids gives us a total of 6,630,000 shares bid for. Adding the 7th bid of $16.75 per share would bring the total bids to 7,150,000 shares bid for, which is greater than the 1 million shares Luther is selling. Therefore, the offer price will be the highest bid that does not exceed the amount of shares being sold, which is $17.35 from bidder B.

Luther Industries Is in the Process of Selling Shares of Stock