Four companies performed IPOs last month: Hot.Com, Biotech Pipe Dreams Corp., Sleepy Tyme Inc., and Bricks N Mortar International. All four companies went public at the offer price of $10 per share. First day performance of each stock(measured as the percentage difference between IPO offer price and first day closing price) given below:
Company First Day Return
Biotech Pipe Dreams 30%
Sleepy Tyme 5%
Bricks N Mortar 0%
a. You submit bid through you broker for 100 shares of each company. Your orders were filled totally, and you cashed out of each deal after one day. Determine average return on these investments?
b. Next assume your orders were not all filled totally as of excess demand for "hot" IPOs. After ordering 100 shares of each company, you were able to purchase only 10 shares of Hot.Com, 20 shares of Biotech Pipe Dreams, 50 shares of Sleepy Tyme, and 100 shares of Bricks N Mortar. Recompute your average return, taking into account your orders were only partly filled.