ZNCM estimated book value post IPO....
To estimate the book value of ZNCM post IPO using an IPO price of $7/share I did the following:
- Shareholders' equity at September 30th for ZNCM is $9.110M.
- Pro forma shareholders' equity for UPG at September 30th is $1.990M (prior to adjustments). The prospectus lists it as $2.990M but the prospectus also assumes a $2M dividend instead of a $3M dividend. Increasing the dividend to ZNCM reduces UPG shareholder equity by $1M to $1.990M. Note that this does not include the IPO proceeds.
- Net proceeds for the IPO for ZNCM are $6.4M. Net proceeds for UPG are estimated at $17.4M using an $8 share price and assuming an overallotment. Since the IPO was at $7/share I will reduce the UPG proceeds by $2.534M giving us estimated proceeds of $14.866M. The sum of the proceeds for the IPO to both companies is $6.4M plus $14.866M which is $21.266M.
- Total shareholders' equity of the two companies is the sum of the gross proceeds and ZCNM's shareholder equity which is $21.266M + $9.110M = $30.376M.
- UPG's shareholders' equity at September 30th adjusted for the IPO proceeds is $1.990M plus the IPO proceeds of $14.866M which is $16.856M.
- To get ZNCM's shareholders' equity at September 30th adjusted for the IPO proceeds we take the total shareholders' equity of the two companies and subtract UPG's shareholders' equity for the portion of the company that is publicly owned (not owned by ZNCM). Therefore, ZNCM's shareholders' equity is:
$30.376M - $16.856M * 3.445M/5.445M = $19.711M
- There are 8,882,239 shares of ZNCM stock outstanding. Therefore, the BV of ZNCM post IPO (assuming the over-allotment occurs) is $2.22/share.
When I do the same calculations assuming no overallotment, I get a book value of $2.16. My understanding is that the shares for the overallotment are priced at $8.40 so likely they will not be sold given that UPG is trading in the $7.25 ballpark.
Mike
