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Issuing New Capital at $40 which sells in the market at $50 benefits

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"If the market values the shares of a company at 50 dollars, then the shares are worth 50. If the company receives $40 from the underwriter, then they are not are not receiving full value for their equity. So consistent with efficient market theory, the cost to them is $10".

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If the firm floats an issue at $40 per share and it sells for $50 per share isn't the difference a net benefit to the firm?

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The expert examines issuing new capital at $40 which sells in the market at $50 benefits.

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ANSWERS

I disagree. The $10 paid to the underwriter is in exchange of the services it rendered in regards to the floatation of the company's new issue. Hence, ...

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