Net Proceeds in an SEO
Orion AutoTech executed a seasoned equity offering (SEO) of 15 million shares at $31.05 per share. Of these, 8 million were primary (new shares issued by the company) and 7 million were secondary (sold by existing investors). Assume the underwriter charges 4.5% of the gross proceeds as an underwriting fee which is shared proportionately between the primary and secondary shares.
✅ Net to issuer = (Primary Shares × Price) − Underwriter fee on primary = (8 × $31.05) − (4.5% × $248.4 million) = $248.4 million − $11.18 million = $237.2 million.
✅ Net to VCs = (Secondary Shares × Price) − Underwriter fee on secondary = (7 × $31.05) − (4.5% × $217.35 million) = $217.35 million − $9.78 million = $207.6 million.
✅ Fee = (Total Shares × Price) × Fee Rate = (15 × $31.05) × 4.5% = $465.75 million × 4.5% = $21 million.