...Running Head: Finance report Header: Name: University Course: Tutor: Date: Value of the new shares for the IPO Earning per Share (EPS) = net income / total number of shares Net income = $2,084,724 Number of shares to be sold = $6,000,000 Earning per Share = $2,084,724/ $6,000,000 = $ 0.35 Advantages of using the underwriting deal • Underwriting deal will ensure success of Pearson Corporation in raising the entire amount as per the target. • The period for waiting for the processing of the deal is not costly and also it is not tedious. • There is a decreased risk and an increased potential once a company uses underwriting. Disadvantages of underwriting deal • The charges involved in underwriting deal are very high hence a company which uses it and has a poor financial record may face problems in meeting the expenses. Advantages of Best effort approach • For the company...
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...homepage: www.elsevier.com/locate/jbf Underpricing of IPOs: Firm-, issue- and country-specific characteristics Peter-Jan Engelen a,*, Marc van Essen b a b Utrecht University, School of Economics, Utrecht, The Netherlands Erasmus University, Rotterdam School of Management, Rotterdam, The Netherlands a r t i c l e i n f o a b s t r a c t Using a large firm-level dataset of 2920 IPOs from 21 countries we examine the impact of country-level institutional characteristics on the underpricing of IPOs. Through hierarchical linear modeling we are able to control for firm-specific and issue-specific characteristics and test whether country-specific institutional characteristics add explanatory power to explain the level of underpricing. Our results show that about 10% of the variation in the level of underpricing is between countries. The quality of a country’s legal framework, as measured by its level of investor protection, the overall quality of its legal system and its level of legal enforcement, reduces the level of underpricing significantly. Ó 2010 Elsevier B.V. All rights reserved. Article history: Received 4 July 2009 Accepted 6 January 2010 Available online 11 January 2010 JEL classification: G30 G32 G38 K22 Keywords: IPO Underpricing Legal framework Investor protection Multi-level modeling 1. Introduction When companies go public, a well-documented phenomenon is the underpricing of the initial public offering (IPO). On average, shares seem to be offered at a price lower...
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...environment affecting IPO decision” BRM Project – IKEA + IPO Abstract This research is aimed at developing a new model that should be able to determine for each privately owned company whether going public is a possibility for attracting new capital. Research upon IPOs resulted in variables of which a conceptual and hypothesized model were created. A meta-analysis and case study should determine the relevance and reliability of the model. Thereafter, a final model can be composed which can be applied to IKEA Group, our target company for the research, in order to obtain the final result; IKEA Group is qualified for an IPO, or not. Table of contents Introduction II 1. Rationale 1 2. Situational Analysis 2 2.1 Initial Public Offering 2 2.2 Advantages 3 2.3 Disadvantages 3 3. Theoretical Background 4 3.1 Initial Public Offering 4 3.2 Product market characteristics and performance 4 3.3 Industry characteristics 5 3.4 Initial underpricing 5 3.5 Hot and cold markets and IPO waves 6 3.6 Long-run performance 6 4. Conceptual Model 8 4.1 Hypotheses 9 4.1.1 Hypotheses Independent variables 9 4.1.2 Moderating Variables 9 5. Research design 11 5.1 Unit of analysis 11 5.2 Meta-analysis 11 5.2.1 The hypothesized model 11 5.2.2 The implementation 13 5.3 Case study 15 5.4 The implementation of the results 15 Bibliography 16 Appendices 20 * * Introduction Introduction The consideration of undertaking an IPO is one of the most...
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...IPO pricing and allocation: a survey of the views of institutional investors * Tim Jenkinson Said Business School, Oxford University and CEPR Howard Jones Said Business School, Oxford University Abstract Despite the central importance of investors to all IPO theories, relatively little is known about their role in practice. In this paper we survey institutional investors about how they assess IPOs, what information they provide to the investment banking syndicate, and the factors they believe influence allocations. Although the theoretical IPO literature has tended to focus on information revelation, the survey raises doubts as to the extent of incremental information production and whether bookrunners are, in practice, able to infer investors’ valuations from their bids. We find that investor characteristics, in particular broking relationships with the bookrunner, are perceived to be the most important factors influencing allocations, which supports the view that IPO allocations are part of implicit quid pro quo deals with investment banks. JEL classification: G23, G24 Keywords : IPO, institutional investors, survey * Corresponding author: Tim Jenkinson, Saïd Business School, 1 Park End Street, Oxford OX1 1HP, UK. e: tim.jenkinson@sbs.ox.ac.uk; t: +44 1865 288916; f: +44 1865 288805. We are very grateful to the Investment Management Association, in particular Tina Johnson, Jane Lowe, and Gordon Midgely, and the Alternative Investment Management Association, in...
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...governance variables and IPO pricing. Results show that managerial ownership is positively related to both offer price and market price premium, which is consistent with a high level of managerial ownership reducing agency costs leading to a closer alignment of interests between managers and shareholders. High blockholder ownership is positively related to offer price premium but not market price premium which implies that underwriters, but not investors, perceive that the quality of the IPO is associated with blockholder ownership. Board size is negatively associated with both measures of IPO pricing, suggesting that smaller boards are better. The other conventional corporate governance variables are not significant. Family ownership and family management are negatively related to both offer price and market price premium, which is consistent with the suggestion that the lack of separation of ownership and management causes family-controlled firms to suffer from cloudy financial vision, resulting in a negative relationship with pricing. However, family chairman is positively associated with offer price premium which implies that underwriters view family leadership on the board as beneficial. The other family governance variables are not significant. None of the board expertise variables examined are significantly related to IPO pricing. I. Introduction The launching of an initial public offering (IPO) is a pivotal event in a firm's history. In the pre-IPO period, firms tend...
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...FROM THE SINGAPORE IPO MARKET VOON PEIJUN (Bachelor of Business Administration (Hons), NUS) A THESIS SUBMITTED FOR THE DEGREE OF MASTERS OF SCIENCE (BUSINESS) DEPART DEPARTMENT OF FINANCE AND ACCOUNTING NATIONAL UNIVERSITY OF SINGAPORE 2009 ACKNOWLEDGEMENT I would like to express my warmest gratitude to Professor Michael Shih for his patient guidance and encouragement all this while. A very big thank you, Sir. I would also like to take this opportunity to thank my family for their love and concern all these years. Thank you Dad, Mum and Brother. Without their support, I would not have come so far. Thank you! Voon Peijun 2009 Page i ABSTRACT The study explores the role of issue managers in the initial public offering (IPO) process. Empirical research shows that IPOs are associated with two significant market anomalies: short-run underpricing puzzle and long-run underperformance phenomenon. This paper examines the reputational influence of issue managers on the two anomalies. Employing the newly developed ‘twelve-month rolling’ reputation ranking approach, our study is the first to furnish a comprehensive ranking of all the issue managers with a substantial presence in Singapore. Based on a sample of 384 IPOs listed on the Singapore Exchange between January 1, 1997 and August 22, 2008, we find evidence of prevalent short-run underpricing and long-run underperformance in the domestic market. Our findings indicate that the IPOs backed by higher reputation...
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...What is an Initial Public Offering (IPO)? How does an IPO allow an organization to grow financially? An initial Public Offering (IPO) is the first sale of stock by a private company to the general public. It allows the company to raise money, and it also allows the comapny to gain future access to the public markets When is a merger or an acquisition, rather than an IPO, a more appropriate way to grow? When the purpose that you are looking for is synergy more than capital for further investments. Select a recent IPO and use the Internet to identify the following characteristics of the selected IPO: I chose GT Solar International a. Initial offering price: $16.50 b. Price 1 month after offering c. Current market price: $9.23 d. Number of shares outstanding at the time of the IPO 142,375 e. Number of shares outstanding 1 month after offering 142,390 f. Current number of shares What features of common stock indicate ownership in the company? What is the ways shareholder’s benefit from ownership? * Claim on Income Common stockholders are entitled to a share of the profits in the form of dividend or it can be retained and reinvested in the company. The amount of dividend payments is not based on a fixed percentage rate, it is recommended and decided by the board of directors. * Claim on Assets If a company goes bankrupt and liquidates all its assets, the common stockholders have the right to receive their share of sale proceeds...
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...presented two alternatives. The purpose is to raise capital from Hertz by issuing and IPO. The second option is an LBO. The “Bidding Group”, is the buyer for the LBO, which consists of Carlyle, Clayton, Dubilier, and Rice. They are from the Merrill Lynch Global Private Equity group. The question is what should the minimum and maximum price be accepted and paid for such deals. The Minimum price that Ford should accept for Hertz is the price of the IPO, which is 13.7 billion. This calculation is based on the pro froma statements on Hertz’s historical performance and market growth rate, which is assumptions and information. On the other side the maximum price that the Bidding Group should pay for the acquiring of Hertz is 14.9 billion. This number was calculated by taking the EBITDA and using the market multiple of 8X. This numbers come from the provided Exhibits and on the forecasted pro forma statements, which consist of operating efficiencies and information. Because Ford has two options to either sell equity, by issuing an IPO for Hertz, this is a value that cannot be ignored and should be considered significantly when making such a financial decision. For the Bidding group to make an competitive offer, it must be at minimal a little greater than the price Ford could fetch by issuing the IPO, furthermore it must be distributed in quicker manner, then receiving the funds from the IPO. A leveraged buyout is only one of the options that Ford has available. The Bidding...
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...ARTICLE IN PRESS Journal of Financial Economics 84 (2007) 330–357 www.elsevier.com/locate/jfec Politically connected CEOs, corporate governance, and Post-IPO performance of China’s newly partially privatized firms$ Joseph P.H. Fana,Ã, T.J. Wonga, Tianyu Zhangb a The Chinese University of Hong Kong, Shatin, N.T., Hong Kong b City University of Hong Kong, Kowloon, Hong Kong Received 19 August 2005; received in revised form 31 January 2006; accepted 6 March 2006 Available online 24 January 2007 Abstract Almost 27% of the CEOs in a sample of 790 newly partially privatized firms in China are former or current government bureaucrats. Firms with politically connected CEOs underperform those without politically connected CEOs by almost 18% based on three-year post-IPO stock returns and have poorer three-year post-IPO earnings growth, sales growth, and change in returns on sales. The negative effect of the CEO’s political ties also show up in the first-day stock return. Finally, firms led by politically connected CEOs are more likely to appoint other bureaucrats to the board of directors rather than directors with relevant professional backgrounds. r 2007 Elsevier B.V. All rights reserved. JEL classification: G34; L33; P31 Keywords: Political connections; Corporate governance; IPO performance; Partial privatization; China We appreciate helpful comments from Stijn Claessens, Mara Faccio, Simon Johnson, Florencio Lopez-deSilanes, John McConnell, Randall Morck, Harold Mulherin...
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...Analysts' Selective Coverage and Subsequent Performance of Newly Public Firms ABSTRACT This study examines the ability of analysts to forecast future firm performance, based on the selective coverage of newly public firms. We hypothesize that the decision to provide coverage contains information about an analyst’s underlying expectation of a firm’s future prospects. We extract this expectation by obtaining residual analyst coverage from a model of initial analyst following. We document that in the three subsequent years, IPOs with high residual coverage have significantly better returns and operating performance than those with low residual coverage. This evidence indicates analysts have superior predictive abilities and selectively provide coverage for firms about which their true expectations are favorable. ∗ Das and Guo are at the University of Illinois at Chicago, and Zhang is at the University of Hong Kong. We thank Eli Amir, Gilbert Bassett, Oleg Bondarenko, Konan Chan, Hsiu-lang Chen, Tim Kruse, Chao-Shin Liu, Malcolm McClelland, Roni Michaely, Tom Nohel, Ram Ramakrishnan, Cathy Schrand, Abbie Smith, Lenny Soffer, WeiLing Song, Robert Stambaugh (Editor), Steve Todd, Beverly Walther, Nan Zhou, an anonymous referee, and seminar participants at the City University of Hong Kong, Indiana University at Indianapolis, the London Business School, Nanyang Technological University, the Office of Economic Analysis at the U. S. Securities and Exchange Commission, Singapore...
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...MSc in Shipping Trade & Finance 2011/2012 Alternative Sources of raising capital in shipping corporations: Bridging the Funding Gap By Linos Alexandros Kogevinas 100021584 Supervisor: Dr. Giovanni Cespa Acknowledgments Having completed a rather long, but enjoyable year at Cass Business School , I feel obligated to thank a few people who helped me along the way. Firstly, I’d like to offer my most sincere thanks to my supervisor, Dr. Giovanni Cespa for accepting to supervise me and putting me on the right track with this dissertation. Following, I’d like to thank my family for their moral support throughout the year. Last but not least I’d like to thank the entirety of the staff at Cass who helped further my education throughout the year. To all of you, Thank you Abstract The goal of this thesis is to evaluate and present the main alternative sources of finance for shipping corporations in the scope of the post-2008 market downturn. By “alternative” the author refers to any source finance that is not vanilla financing i.e. bank debt. Lists of benefits and drawbacks for each alternative source will be presented for all parties of the transaction in question. This is done in order to present an evaluation that will facilitate the reader in understanding the value of each source as well as potential costs and risks. While there are numerous alternative sources that could be covered, the emphasis has fallen only on those that carry at least a...
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...International Public Offering (IPO) For A Global Firm Team D FIN/370 September 13, 2015 Joe Brennan (Introduction) An Initial Public Offering (IPO) is the means by which privately held companies transition into publicly traded companies. Hence the phrase, “taking a company public.” From an organizational standpoint, taking a company public is one of the biggest decisions a company’s board of directors will make in the company’s lifetime. The transition from a privately-held entity to a public one has a substantial impact on how the company operates. An initial public offering, or IPO, is the first sale of stock by a company to the public. A company can raise money by issuing either debt or equity. If the company has never issued equity to the public, it's known as an IPO. Investment Banker and Underwriter The role of the investment banker in an IPO is to find investors for a company that is looking to raise capital. The investment banker needs to help the company prepare a prospectus and eventually find clients who are willing to invest and then manage the final sale of the securities for the company. The underwriter works with the investment bank and handles selling the stock released in an IPO. “The underwriter takes the pulse of prospective buyers and then recommends an IPO price to list the shares for sale. An excessive price may leave the firm with unsold stock while a price that is too low will mean forgone revenue from the...
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...Research shows that a higher turnover volume is associated with a positive initial rate of return and vice versa which is explained by disposition effect. • The research is conducted on the emerging market in Poland. The Warsaw stock exchange which recently have been the second largest IPO market after London. INTRODUCTION • Investors always making decisions • They do not always act as would be predicted by the neo classical theory of finance. • Disposition effect considered an implication of Prospect theory of kahnemen and tversky. Prospect theory says investors exhibit an S-shaped valuation function. Investors avoid risk in the case of potential gains and seek risk in the case potential losers. • (Figure 1) explains disposition effect. An investor tends to sell a share much faster when there is a gain because the utility of further price growth is smaller. • Disposition Effect can be analyzed from various perspectives: individual, group and aggregate. • INDIVIDUAL: decision making process itself. Subjects selling winners and keeping loser.(weber and camerer) • GROUP: level of disposition effect refers to the characteristics of particular group of investors. Disposition effect less than...
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...Cobol, C 8.1.2 Types of Programming Language: 1) Low Level Programming Language • • Why Low Level? : Because it is designed closer to the hardware Machine Language (1st Generation) Assembly Language (2nd Generation) Made up of instructions written in binary code (0 and 1). • Written in mnemonics, more English-like code; codes shorter than The only language that is directly understood by the machine languages computer. Does not need any translator program. • Need to be translated by assembler into machine language before it can be executed by the computer. Machine dependent (written for particular • Machine dependent (written for particular computer and has computer and has to be changed for using on a Describe/what is/ explain/characteristic • different computer). Example of coding to be changed for using on a different computer). Advantages • • Execution speed is very fast. (It does not require any translation because machine language is directly understood by CPU) Translation free (Computer understands only the machine language) Program written in machine language are very lengthy Machine dependent (program is written for particular computer and has to be changed for using on a different computer) • • Easy to understand and use: Assembly language use mnemonics instead of using numerical opcodes and memory locations used in machine language. Assembly programs run much faster and use less memory Disadvantages • • • • Long and tedious...
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...alternatives” affects the bidding process for Hertz by giving Hertz another plan of attack if other viable sale opportunities fall through. By obtaining an IPO price as a base for the value of the company, Ford’s strategy would give Hertz other options to retrieve necessary capital, thus reducing the amount of risk. This strategy would then give Hertz a base bid that would be either equal to or above the amount of what could be theoretically obtained from an IPO. In what way does Hertz conform or not conform to the definition of an “ideal LBO target”? Do you believe Hertz is an appropriate buyout target One way that Hertz conforms to be an “ideal LBO candidate” is the proven financial performance and pretax profit the company has generated since 1967. In addition, from 1985 to 2005, revenues had grown at a compound annual growth rate of 7.6%. Another characteristic that Hertz possesses as an ideal LBO candidate is their management team. Having a substantial amount of industry knowledge within a management team is a key component in ascertaining a company. Also, if need be an experienced manager (George Tamke) could replace the current CEO (Craig Koch) and restructure a new compensation structure based on newly developed incentive plans that targets cash flow and capital usage metrics. Based on these characteristics (as well as others) we believe that Hertz does have an attractive record and does qualify as an appropriate buyout...
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