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) ?
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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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