Companies often issue additional shares to raise money for their financing needs. For example, real estate investment trusts are known to issue shares to acquire more properties and grow their business. You can find information about a company's recently issued shares in its annual report, and here's how to use that information to calculate the issue price per share.
Calculating issue price per share
First, you'll need to locate the company's information about its recently issued shares. This can be found in the annual report, often in several places, and should include the following information:
- The number of shares issued.
- The net proceeds from the issue.
- The costs related to issuing the shares, such as fees and commissions.
- Although it's not needed to calculate the issue price, the annual report can usually tell you the month in which the stock was issued, as well as what the proceeds were used for.
Once you have this information, the calculation is pretty straightforward. Start by adding the net proceeds to the costs in order to find the gross (total) proceeds from the stock issuance.
Then, divide the gross proceeds by the number of shares issued to calculate the issue price per share.
To illustrate, let's consider some information from Realty Income Corporation's (NYSE:O) 2014 annual report. After the financial statements section, the company lists several notes, including one about its common stock issuance:
"In April 2014, we issued 13,800,000 shares of common stock, including 1,800,000 shares purchased by the underwriters upon the exercise of their option to purchase additional shares. After underwriting discounts and other offering costs of $22.8 million, the net proceeds of $528.6 million were used to repay borrowings under our acquisition credit facility."
Using the formulas, we can calculate the gross proceeds of the issuance to be $551.4 million. Dividing this by the 13,800,000 shares that were issued, we can calculate the issue price per share to be approximately $39.96.
Ready to take your investing knowledge to the next step? Stop by our Broker Center, and we'll help you get started.
This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors. We'd love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Your input will help us help the world invest, better! Email us at email@example.com. Thanks -- and Fool on!
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.