The Bread.Com Co. just had an Initial Public Offering (IPO). The company sold all the shares to an underwriter at $10 per share. On the day of the IPO, the underwriter sold the common stocks to investors at the offer price of $11 per share. At the end of the offer date, the stocks were traded at $15 per share.
1. What is the percentage underwriter spread for this stock?
2. Calculate the percentage of IPO underpricing for the Bread.Com.
3. What is the “book-building” process for an IPO?