IPO Underwriting Report

Finance Assignment 2: Final Project: IPO Report
As a part of your Final project assignment on Wednesday, November 12, 2008,

compile your findings of the assignments from Week 2 through Week 5 for the
Teabucks public offering. Use the data and information to prepare a report on
taking Teabucks public in a Word document. Submit your report to the W6:
Assignment 2 Dropbox.
Maximum
Grading Criteria
Points
Compiled all the findings and prepared the report on
40
the final project.
Total: 40
For search: Use the data and information to prepare a report on taking company
public
summary Initial Public Offering prospectus
Following is the guidance that I will post for the final project in the last week of class:
For the past five weeks you have evaluated various aspects of Teabucks. You have determined
its approximate value by various methods, estimated beta and the expected return, and
researched IPO procedures and selection of an underwriter. Your final paper is where all of this
comes together.
This weeks assignment should be a paper, in good APA format that uses all of this information in
a cohesive statement. You must establish the price of the stock you will issue for Teabucks, the
number of shares, and why you have determined these to be appropriate. You will need to
discuss your selection of an underwriter and how you intend to offer the shares. Explain and
support all of your decisions.
Please do not copy/paste previous assignments together and turn this in. Use the data and
information you have developed as background to write a great paper.
Tea-buckers
31-October-2008
We were created on June 2, 2006. Our drives in recognizing a designated

objective enterprise will not be restricted to a specific commerce. However,
we plan to target our exploration on the commercial tea section. At Tea-
buckers we plan to use money obtained from the proceeds of our Initial-
Public-Offering and our capital-stock, debt or a combination of money,
capital-stock in addition to debt, in order to promote efficient operations of
our business combination, financially.
During these dialogues, we have in addition spent periods explaining the

capital structure of the Initial-Public-Offering, the firm combination
agreement procedure as well as the timeline within which we must either
enter a letter of purpose or decisive correspondence for a firm
combination, or yield to investors the proceeds of the Initial-Public-
Offering, which are kept in duty. Stable with the divulgences in the
prospectus referring to our Initial-Public-Offering, our certificate-of-
incorporation grants that we will carry on in subsistence merely until
October 31, 2010, 24 calendar-months from the implemented date of our
Initial-Public-Offering. In the event that we have not consummated an
industry alliance by such period, our corporate existence will cease, and
we will disband as well as liquidate for the objectives of winding up our
liaisons. Tea-buckers cannot assure investors that we will find a fitting
industry composite within the designated framework.
This is the current stock-price of the option that Tea-buckers is offering,

stated in terms of dollars per share. Current Stock Price ($2,500,000 /
100,000) = $25
This is the actual grant of stocks or an estimate of the annual stock

options that Tea-buckers be offering each year. These are the number of
shares at Tea-buckers an investor will have an option on each year.
Annual Stock Options Grant (shares) = 100,000
This is the strike price of the stock option at Tea-bucks. Normally, the
strike price of an option is set higher than the current stock price. This
provides management with an incentive to grow the value of the company
and its share price: the Strike-Price is ($2,700,000 / 100,000) =
$27
This is the expected growth in the stock's value each year. Again, for a
stock option to have value the price per share usually has to rise above
current levels. This value is Tea-buckers expected percentage rise in the
stock's price each year. Stock Price Growth Rate (% / Year) = 10%
This is the number of years in which Tea-buckers will be offering options.

If you're already participating in a stock option plan at work, then you can
enter the number of years you've been participating. Number of Years
(Years) = 10
This is the ending prices per share for the stock. This value is calculated
by taking the current stock price and escalating it by the stock price
growth rate. Ending Share Price $25(1+.10)^10 = 25 x 2.59 =
$64.84
This is the average strike price per share. This figure assumes that as the
current stock price goes up, so will the strike price. The strike-price is
accelerated at the stock cost growth-rate. 27 x 1.61 = Average Strike
Price = 43.48
These are the total number of stock options granted over the number of
years indicated earlier. Total Stock Options Granted (100,000 x 10
years) = 1,000,000
This is the total value of the stock options granted. This value is
calculated by taking the ending share price, subtracting it from the
average strike price and multiplying it by the total stock options granted.
Value of Stock Options (64.84 43.48 x 1,000,000) =
21,359,791.50
Tea-buckers exclusive undertakings ever since our formation have been

organizational pursuits, as well as those required to make ready for our
Initial-Public-Offering, plus thereafter, actions connected to engaging in a
industry amalgamation within objective organizations. At Tea-buckers we
will in no way initiate any operating profits until after culmination of an
enterprise amalgamation. We have given rise to non-operating gains in the
framework of interest-income on our money in addition to currency
equivalents with short-term investments.
Tea-buckers had total revenue of $750,000,000 for period ending in 2007

that consisted of a Cost of Goods Sold expense at $575,000 reduced by
$40,000,000 of general and administrative expenses as well as an income-
tax expense of $25,000,000.
And, Tea-bucks net income was $40,000,000 for the period ending
December 31, 2007.
Our directors have discretion with admiration to the fixed implementation

of the net-proceeds of the Initial-Public-Offering, in spite of the fact that
significantly all of the net-proceeds of the Initial-Public-Offering are
calculated to be comprehensively fitted toward consummating the
organizational amalgamation; it may not inevitably represent the
procurement of much of the outstanding equity of such enterprise; and, it
may not ineluctably represent an enterprise alliance for accounting
resolutions. Also, there is no promise that we will be able to flourishingly
influence an organizational alliance.
At Tea-buckers are authorized to take in up to $2,500,000, as well as

aggregates for corporate-income in addition to franchise-taxes, from
interest-earned on the trust account used to start our undertakings earlier
when consummating an industry mixture. We currently count on sustaining
outlays for the following determinations until we perfect a industry
amalgamation: outlays sustained to recognize one or more possible
objective organizations; due diligence as well as examination of designated
target industries; legal as well as accounting charges referring to our SEC
reportage responsibilities along with overall common issues; designing
plus working out a trade amalgamation, involving the formulation of a
allocated remittance or the remittance of exclusivity or related charges and
costs.
At Tea-buckers we may utilize all or almost all of the proceeds kept in trust,
not including the delayed allocation of the underwriters' discount in
addition to quantities utilized for working-capital and for taxes, to attain or
merge with any additional target businesses. Tea-buckers may in no way
utilize all of the proceeds kept in the trust-account in relation to an industry
amalgamation, on account of the regard for the industry amalgamation is
smaller than any proceeds in trust, or considering that we may finance an
allocation of the regard with capital-stock or debt-securities that we will be
able to release. In that occurrence, the proceeds included in the trust-
account, plus any other net gains not consumed will be utilized to invest
within enterprises of the objective company or companies.
The operating enterprises that we obtain or merge with in such a firm

alliance will have, independently or collectively, a fair-marketplace worth
even to at the minimum of 80% of our net-assets at the time of such an
attainment. When we consummate several industry combinations, that
invariably have a fair-marketplace worth of 80% of our net-assets; then, we
will force that such proceedings are accomplished concurrently.
Tea-buckers will release supplemental capital-stock or debt-securities to

finance an industry alliance. The issuance of extra capital-stock, involving
the transformation of any alterable debt-securities, we will release, or
taking on additional debt, may have data outcomes on our corporation as
well as our financial situation. We expect that we will merely consummate
such subsidization concurrently with the culmination of an industry
alliance.
When we are incapable to come upon a fitting target enterprise by October

31, 2010, we will be constrained to liquidate. In the event that we are
constrained to liquidate, the per-share liquidation quantity might be smaller
than the preliminary per item Initial-Public-Offering value, due to the
underwriting allowances, as well as costs connected to our Initial-Public-
Offering and on account of the worth of the justifications in the per item
offering worth. Moreover, when 3rd parties arrange applications in contrast
to us, the offering-proceeds contained in the trust-account may be related
to those pretensions, causing an additional diminution to the per-share
settlement value. Also, our justifications should conclude worthless
provided that we dissolve in advance of the culmination of the industry
amalgamation.
It is conceivable that we may utilize an allotment of the finance not in the

trust-account to construct a deposit, a remittance of an arrangement with
recognition to a specific suggested industry alliance. If Tea-buckers were
eventually forced to give up such backing, we might not have an adequate
aggregate of working-capital unoccupied within the trust-account to settle
costs affiliated without any suitable enterprise unification without obtaining
supplemental funding. If Tea-buckers were unqualified to obtain
supplemental funding, we will not consummate an organizational
unification in the allocated duration and would be forced to liquidate.
Options in addition to warrants released in concurrence with our Initial-

Public-Offering are equity related derivatives and therefore stand for off-
balance-sheet settings. The options as well as warrants come together
within the range peculiarity within paragraph 11(a) of Financial-Accounting-
Standards-Board-Statement No. 133 ("FASB 133") and are as a result not
reported as derivatives for intentions of the FASB 133, but alternatively are
reported as equity. See the notes to our financial statements for a
discussion of the options and warrants.
The securities held in the trust-account are in the name of our entirely
retained subsidiary, Affirma-Acquisition-Security-Corporation, which was
created on October 31, 2008 specifically for such purpose.
References
10-K. (2008, Oct. 15). Retrieved Oct. 24, 2008, from
http://www.investopedia.com/terms/1/10-k.asp.
Annual reports. (2008, Oct. 15). Retrieved Oct. 24, 2008, from
http://www.library.jhu.edu/researchhelp/business/company/annual.html.
FreeEDGAR: Free Real-Time SEC EDGAR Filings. (2008, Oct. 15). Retrieved Oct. 24,
2008, from http://freeedgar.com/.
SEC Filings & Forms (EDGAR). (2008, Oct. 15). Retrieved Oct. 24, 2008, from
http://www.sec.gov/edgar.shtml.
The IPO Process. (2008, Oct. 15). Retrieved Oct. 23, 2008, from
http://www.exinfm.com/board/ipo_process.htm.
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Finance Assignment 2: Final Project: IPO Report

As a part of your Final project assignment on Wednesday, November 12, 2008,

We were created on June 2, 2006. Our drives in recognizing a designated

During these dialogues, we have in addition spent periods explaining the

This is the current stock-price of the option that Tea-buckers is offering,

This is the actual grant of stocks or an estimate of the annual stock

This is the number of years in which Tea-buckers will be offering options.

Tea-buckers exclusive undertakings ever since our formation have been

Tea-buckers had total revenue of $750,000,000 for period ending in 2007

Our directors have discretion with admiration to the fixed implementation

At Tea-buckers are authorized to take in up to $2,500,000, as well as

The operating enterprises that we obtain or merge with in such a firm

Tea-buckers will release supplemental capital-stock or debt-securities to

When we are incapable to come upon a fitting target enterprise by October

It is conceivable that we may utilize an allotment of the finance not in the

Options in addition to warrants released in concurrence with our Initial-

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