Ipo's
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Initial Public Offerings:
Presenting to Markets
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FIN-323
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8/16/2013
Table of Contents
1. Introduction I. Defining IPOs II. Detailing Pros and Cons III. Hypothesis to Offering timeline
2. Taking a Company Public I. S.E.C. regulations II. Stages of Market Introduction
3. IPO Valuation I. General Valuation II. Underpricing a. Reasons for Underpricing b. Feedback of Advantages and Disadvantages
4. Longevity and IPO Performance I. Offering and Post-Offering Performance II. Proof of Longevity
Abstract
This paper addresses the general IPO information. The process of going public is discussed, with emphasis on how the mechanics deal with potential conflicts of interest. The valuation of IPOs, price stabilization, and the costs of going public are also discussed. Also empirical patterns are documented and analyzed.
1. Introduction An initial public offering (IPO) is a public offering where a company set and offers shares of stock to be sold to the general public. The initial offering is the first time the company offers stock on a security exchange. Through this process, privately controlled companies are transformed into publically traded companies. IPOs are utilized by corporations and companies to raise capital, to possibly monetize the investments of early private investors, and to ultimately become publicly traded entities. A company selling shares is never required to repay the capital to its public investors. After the IPO, when shares freely traded in an open market, money changes hands between its investors. Although an IPO offers many advantages, there are also significant disadvantages. Primarily, among these disadvantages are the costs associated with going public, and being required to disclose company information that could give competitors in the same field distinct advantages, or create difficulties with vendors. The Prospectus details the proposed offering to potential
Initial Public Offerings:
Presenting to Markets
-------------
FIN-323
------
8/16/2013
Table of Contents
1. Introduction I. Defining IPOs II. Detailing Pros and Cons III. Hypothesis to Offering timeline
2. Taking a Company Public I. S.E.C. regulations II. Stages of Market Introduction
3. IPO Valuation I. General Valuation II. Underpricing a. Reasons for Underpricing b. Feedback of Advantages and Disadvantages
4. Longevity and IPO Performance I. Offering and Post-Offering Performance II. Proof of Longevity
Abstract
This paper addresses the general IPO information. The process of going public is discussed, with emphasis on how the mechanics deal with potential conflicts of interest. The valuation of IPOs, price stabilization, and the costs of going public are also discussed. Also empirical patterns are documented and analyzed.
1. Introduction An initial public offering (IPO) is a public offering where a company set and offers shares of stock to be sold to the general public. The initial offering is the first time the company offers stock on a security exchange. Through this process, privately controlled companies are transformed into publically traded companies. IPOs are utilized by corporations and companies to raise capital, to possibly monetize the investments of early private investors, and to ultimately become publicly traded entities. A company selling shares is never required to repay the capital to its public investors. After the IPO, when shares freely traded in an open market, money changes hands between its investors. Although an IPO offers many advantages, there are also significant disadvantages. Primarily, among these disadvantages are the costs associated with going public, and being required to disclose company information that could give competitors in the same field distinct advantages, or create difficulties with vendors. The Prospectus details the proposed offering to potential
References: Lee, I., S. Lochhead, J. Ritter, and Q. Zhao (1996) The costs of raising capital. Journal of Financial Research 19, 59-74. Krigman, L., W. Shaw, and K. Womack (1997) The persistence of IPO Mispricing and the predictive power of flipping, unpublished Dartmouth College working paper. Brennan, M., and J. Franks. (1995) Underpricing, ownership and control in initial public offerings of equity securities in the U.K., Journal of Financial Economics 45, 391-413. Miller, E. (1977) Risk, uncertainty, and divergence of opinion. Journal of Finance 32, 1151-1168. Schultz, P. (1993) Unit initial public offerings: A form of staged financing. Journal of Financial Economics 34, 199-229.