Technical question: Calculating IPO shares issued at Exit

If a company is planning to IPO 15% of their company and they currently have 200 shares outstanding, what would be the formula to calculate the number of shares issued?

I thought it would be:
(Current Shares outstanding * %IPO)

but the actual formula is:

(Current Shares outstanding * %IPO) / (1 - %IPO)

Why are we dividing by (1-Percent IPO) ?

 
Best Response

That formula still looks wrong. It should be Current Shares / (1 - IPO %), the idea being that you want your current shares to = 85% of the total shares outstanding post-IPO.

If "owned shares" = 85% post-IPO, then Total Post-IPO Shares * 85% = Owned Shares, divide both sides by 85%, and you get Total Post-IPO Shares = Owned Shares / 85%. Then Just do Total Post-IPO Shares - Owned Shares to get Shares Issued

 

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