Reference no: EM132546143

Hogwarts is a Canadian based (for legal and financial purposes) publicly traded company operating a network of exclusive boarding schools around the world. The share capital note (Note 12) from the company's financial statements for the year ended February 26, 2017, is presented in Exhibit A.

Exhibit B includes an extract from Hogwarts annual information form that outlines the multiple-voting share structure.

EXHIBIT A : Excerpt from Hogwarts 2017 Annual Report

Note 12. Share capital

Prior to the IPO, the Company's authorized share capital consisted of an unlimited number of Class A, Class B, Class C, Class D common shares and preferred shares. There were 110,987,688 Class A common shares and 62,781,263 Class C common shares issued and outstanding.

Immediately prior to the closing of the IPO, all of the outstanding Class A and Class C common shares were exchanged for either one multiple voting share or one subordinate voting share. The Company's Class B and Class D common shares and preferred shares were removed from the Company's authorized share capital. The Company's authorized share capital consists of

(i) an unlimited number of subordinate voting shares,

(ii) an unlimited number of multiple voting shares and

(iii) an unlimited number of preferred shares, issuable in series. Each subordinate voting share is entitled to one vote and each multiple voting share is entitled to 10 votes on all matters upon which holders are entitled to vote.

Following the foregoing share exchanges, all of the Company's issued and outstanding multiple voting shares and subordinate voting shares were consolidated on a one-to-0.5931691091 basis.

• Concurrent with the IPO and Secondary Offering, the selling shareholders exchanged a certain number of their multiple voting shares for subordinate voting shares. As at February 26, 2017, there were 55,756,002 multiple voting shares and 53,016,459 subordinate voting shares issued and outstanding. There were no preferred shares issued and outstanding as at February 26, 2017.

EXHIBIT B : Excerpt from Hogwarts 2017 Annual Information Form

• Initial Public Offering On October 3, 2016, we successfully closed our initial public offering (the "IPO") of our subordinate voting shares (the "Shares") at a price of $16.00 per Share through a secondary sale of shares by our principal shareholders. Our principal shareholders sold 25,000,000 Shares under the IPO for total gross proceeds of $400.0 million. The Shares are listed for trading on the Toronto Stock Exchange under the symbol "MAGIC".

• The underwriters were granted an over-allotment option (the "Over-Allotment Option") to purchase up to an additional 3,750,000 Shares from our principal shareholders at a price of $16.00 per Share. The Over-Allotment Option was fully exercised after the IPO and raised additional gross proceeds of $60.0 million for the selling shareholders. Underwriting fees were paid by the selling shareholders and other expenses related to the IPO of approximately $7.7 million were incurred and are being paid by us.

• In connection with and immediately prior to the IPO, each Class A and Class C common share was exchanged for either one multiple voting share or one Share. Our Class B and Class D common shares and preferred shares were removed from our authorized share capital. Our authorized share capital consists of (i) an unlimited number of Shares, (ii) an unlimited number of multiple voting shares and (iii) an unlimited number of preferred shares, issuable in series.

• Following the foregoing share exchanges, all of our issued and outstanding multiple voting shares and Shares were consolidated on an approximately one-to-0.5932 basis. In connection with the IPO, options to acquire Class A and Class D common shares were also consolidated on an approximately one-to-0.5932 basis for options exercisable to acquire Shares at a post-consolidated exercise price such that the in-the-money value of such options remained unchanged.

• Concurrent with the IPO, amendments to our credit facilities with our syndicate of lenders became effective. See the section entitled "Liquidity and Capital Resources - Credit Facilities".

Secondary Offering

• On January 26, 2017, we successfully closed a secondary offering (the "Secondary Offering") of our Shares by certain of our shareholders at a price of $17.45 per Share, as well as a concurrent block trade by a group of our employees ("Concurrent Block Trade"). Our shareholders sold 20,100,000 Shares under the Secondary Offering and our employees sold 1,788,366 Shares under the Concurrent Block Trade for total gross proceeds of $382.0 million. Underwriting fees were paid by the selling shareholders and other expenses related to the Secondary Offering of approximately $0.9 million were incurred and are being paid by us.

Required

Question a. Describe the changes that the company made to its capital structure when it went public.

Question b. How much money did Hogwarts raise through its IPO? On a percentage basis, how much were the total fees and expenses incurred as part of the IPO relative to the funds raised though the IPO?

Question c. Note 12 in Exhibit A states that prior to the IPO, the company consolidated its outstanding shares. Explain what this means and what effect this step would have on share value.