Guide to Going Public Strategic Considerations Before, During and Post-IPO Contents
Total Page:16
File Type:pdf, Size:1020Kb
Load more
Recommended publications
-
Stock Exchange Listing Agreements As a Vehicle for Corporate Governance
1981] STOCK EXCHANGE LISTING AGREEMENTS AS A VEHICLE FOR CORPORATE GOVERNANCE INTRODUCTION After nearly two hundred years of operation, stock exchanges remain largely unexplored as vehicles for regulating the internal affairs of corporations whose stocks they list for trading. Such regulation would seek to establish uniform, easily comprehensible standards of corporate conduct and to communicate them to every investor. The standards would be implemented by requiring that corporations conform to them as a prerequisite to having their securities traded on an exchange. As a result, investors could more accurately assess the value of corporate equity securities than they can today, and would be less likely to base an investment decision on a misunderstanding of their potential rights as shareholders.1 In evaluating the price of an equity security today, investors face fifty state corporation laws and as many state judicial systems, which together determine the bundle of rights the investor pur- chases. This problem stems from the principle that state law defines the rights and obligations a corporation owes to its share- holders.2 Investors who have neither the expertise to school them- selves in the nuances of state corporation law nor the resources to hire an attorney for that purpose 3 may choose "safer" invest- ments,4 or equally risky but more understandable investments,5 or I Stock exchanges currently regulate some aspects of internal corporate affairs, see, e.g., note 40 infra, but this Comment advocates greater supervisory powers. Furthermore, because of the relative obscurity of listing agreement provisions, investors do not generally appreciate the specifies of current exchange regulations. -
Why Are the First Day Returns of China's Ipos So High?
University of Wollongong Research Online Faculty of Commerce - Papers (Archive) Faculty of Business and Law 2005 Why Are the First Day Returns of China’s IPOs So High? S. Ma University of Wollongong, [email protected] Follow this and additional works at: https://ro.uow.edu.au/commpapers Part of the Business Commons, and the Social and Behavioral Sciences Commons Recommended Citation Ma, S.: Why Are the First Day Returns of China’s IPOs So High? 2005. https://ro.uow.edu.au/commpapers/474 Research Online is the open access institutional repository for the University of Wollongong. For further information contact the UOW Library: [email protected] Why Are the First Day Returns of China’s IPOs So High? Abstract We investigate the causes of the high first day returns of Chinese firms making an initial public offering (IPO) of A-shares from 1991 to 2003 on Shanghai and Shenzhen stock exchanges. Our results show an average underpricing of 175.21 percent. We argue that the IPO underpricing is an interaction of ex-market underpricing and on-market overpricing. The high first day returns of China’s IPOs are most likely generated from on-market overpricing. Government intervention, market speculation, special ownership structure, strategy of proceeds maximization and risk concerns are the main drivers of the high first day returns. However, the high first day returns have decreased significantly in ecentr years. We explained this change by testing the risk composition hypothesis, the realignment of incentives hypothesis and the changing issuer objective hypothesis, which shows that the reduction in risk, senior managerial shares and seasoned offerings mitigate the first day returns. -
An Assessment of Valuation Methods of Stock Initial Public Offerings on Tehran Stock Exchange
International Journal of Academic Research in Business and Social Sciences 2017, Vol. 7, No. 4 ISSN: 2222-6990 An Assessment of Valuation Methods of Stock Initial Public offerings on Tehran Stock Exchange Mohammad Kheiry 1, Sima Golozar 2,*, Ali Amiri 3 1 Department of Economic, Accounting and Management, Payam Noor University, Tehran, Iran. Kheiry Email: [email protected] 2,* Postgraduate student of Financial Management, Qeshm Institute for Higher Education, Qeshm, Iran. Email: [email protected] 3 Department of Accounting, college of human science, Bandar Abbas, Islamic Azad University, Bandar Abbas, Iran. Email: [email protected] DOI: 10.6007/IJARBSS/v7-i4/2822 URL: http://dx.doi.org/10.6007/IJARBSS/v7-i4/2822 Abstract Every day hundreds of companies all over the world are entering capital market for the first time by issuing stocks. By doing so, they decide to invest capital necessary for continuing activity and expanding operations accordingly. For this reason, it is important to the companies that price specified for their stock demonstrate real value of assets and their growth and development opportunities in the future. The purpose of this research is to study valuation methods of stock initial public offerings at the Tehran Stock Exchange. Population and study sample consisted of firms publicly offered their stocks for the first time at Tehran Stock Exchange during 2009-2014, and experienced no trading halt, i.e. 45 companies of which seven companies were eliminated due to lack of trading on the stock exchange and 38 firms were chosen. The research method is correlational-descriptive and the research is an applied research by purpose. -
Divestment May Burst the Carbon Bubble If Investors' Beliefs Tip To
Divestment may burst the carbon bubble if investors’ beliefs tip to anticipating strong future climate policy Birte Ewers,1;2;∗ Jonathan F. Donges,1;3;∗;# Jobst Heitzig1, Sonja Peterson4 1Potsdam Institute for Climate Impact Research, Member of the Leibniz Association, P.O. Box 60 12 03, 14412 Potsdam, Germany 2Department of Economics, University of Kiel, Olshausenstraße 40, 24098 Kiel, Germany 3Stockholm Resilience Centre, Stockholm University, Kraftriket¨ 2B, 114 19 Stockholm, Sweden 4Kiel Institute for the World Economy, Kiellinie 66, 24105 Kiel, Germany ∗The first two authors share the lead authorship. #To whom correspondence should be addressed; E-mail: [email protected] February 21, 2019 To achieve the ambitious aims of the Paris climate agreement, the majority of fossil-fuel reserves needs to remain underground. As current national govern- ment commitments to mitigate greenhouse gas emissions are insufficient by far, actors such as institutional and private investors and the social movement on divestment from fossil fuels could play an important role in putting pressure on national governments on the road to decarbonization. Using a stochastic arXiv:1902.07481v1 [q-fin.GN] 20 Feb 2019 agent-based model of co-evolving financial market and investors’ beliefs about future climate policy on an adaptive social network, here we find that the dy- namics of divestment from fossil fuels shows potential for social tipping away from a fossil-fuel based economy. Our results further suggest that socially responsible investors have leverage: a small share of 10–20 % of such moral investors is sufficient to initiate the burst of the carbon bubble, consistent with 1 the Pareto Principle. -
Initial Public Offerings
November 2017 Initial Public Offerings An Issuer’s Guide (US Edition) Contents INTRODUCTION 1 What Are the Potential Benefits of Conducting an IPO? 1 What Are the Potential Costs and Other Potential Downsides of Conducting an IPO? 1 Is Your Company Ready for an IPO? 2 GETTING READY 3 Are Changes Needed in the Company’s Capital Structure or Relationships with Its Key Stockholders or Other Related Parties? 3 What Is the Right Corporate Governance Structure for the Company Post-IPO? 5 Are the Company’s Existing Financial Statements Suitable? 6 Are the Company’s Pre-IPO Equity Awards Problematic? 6 How Should Investor Relations Be Handled? 7 Which Securities Exchange to List On? 8 OFFER STRUCTURE 9 Offer Size 9 Primary vs. Secondary Shares 9 Allocation—Institutional vs. Retail 9 KEY DOCUMENTS 11 Registration Statement 11 Form 8-A – Exchange Act Registration Statement 19 Underwriting Agreement 20 Lock-Up Agreements 21 Legal Opinions and Negative Assurance Letters 22 Comfort Letters 22 Engagement Letter with the Underwriters 23 KEY PARTIES 24 Issuer 24 Selling Stockholders 24 Management of the Issuer 24 Auditors 24 Underwriters 24 Legal Advisers 25 Other Parties 25 i Initial Public Offerings THE IPO PROCESS 26 Organizational or “Kick-Off” Meeting 26 The Due Diligence Review 26 Drafting Responsibility and Drafting Sessions 27 Filing with the SEC, FINRA, a Securities Exchange and the State Securities Commissions 27 SEC Review 29 Book-Building and Roadshow 30 Price Determination 30 Allocation and Settlement or Closing 31 Publicity Considerations -
The CEO's Guide to Corporate Finance
CORPORATE FINANCE PRACTICE The CEO’s guide to corporate finance Richard Dobbs, Bill Huyett, and Tim Koller Artwork by Daniel Bejar Four principles can help you make great financial decisions— even when the CFO’s not in the room. The problem Strategic decisions can be com- plicated by competing, often spurious notions of what creates value. Even executives with solid instincts can be seduced by the allure of financial engineering, high leverage, or the idea that well-established rules of eco- nomics no longer apply. Why it matters Such misconceptions can undermine strategic decision making and slow down economies. What you should do about it Test decisions such as whether to undertake acquisitions, make dives- titures, invest in projects, or increase executive compensation against four enduring principles of corporate finance. Doing so will often require managers to adopt new practices, such as justifying mergers on the basis of their impact on cash flows rather than on earnings per share, holding regular business exit reviews, focusing on enterprise-wide risks that may lurk within individual projects, and indexing executive compensation to the growth and market performance of peer companies. 3 The CEO’s guide to corporate finance It’s one thing for a CFO to understand the technical methods of valuation—and for members of the finance organization to apply them to help line managers monitor and improve company performance. But it’s still more powerful when CEOs, board members, and other non- financial executives internalize the principles of value creation. Doing so allows them to make independent, courageous, and even un- popular business decisions in the face of myths and misconceptions about what creates value. -
Effects of the Limit Order Book on Price Dynamics
Effects of the Limit Order Book on Price Dynamics Tolga Cenesizoglu Georges Dionne Xiaozhou Zhou November 2014 CIRRELT-2014-60 Effects of the Limit Order Book on Price Dynamics Tolga Cenesizoglu1, Georges Dionne1,2,*, Xiaozhou Zhou1,2 1 Department of Finance, HEC Montréal, 3000 Côte-Sainte-Catherine, Montréal, Canada H3T 2A7 2 Interuniversity Research Centre on Enterprise Networks, Logistics and Transportation (CIRRELT) Abstract. In this paper, we analyze whether the state of the limit order book affects future price movements in line with what recent theoretical models predict. We do this in a linear vector autoregressive system which includes midquote return, trade direction and variables that are theoretically motivated and capture different dimensions of the information embedded in the limit order book. We find that different measures of depth and slope of bid and ask sides as well as their ratios cause returns to change in the next transaction period in line with the predictions of Goettler, Parlour, and Rajan (2009) and Kalay and Wohl (2009). Limit order book variables also have significant long term cumulative effects on midquote return, which is stronger and takes longer to be fully realized for variables based on higher levels of the book. In a simple high frequency trading exercise, we show that it is possible in some cases to obtain economic gains from the statistical relation between limit order book variables and midquote return. Keywords. High frequency limit order book, high frequency trading, high frequency transaction price, asset price, midquote return, high frequency return. Results and views expressed in this publication are the sole responsibility of the authors and do not necessarily reflect those of CIRRELT. -
IPO Or Divestiture: Making Informed Decisions
IPO or divestiture: Making informed decisions By Yael Woodward Amaral, Partner, Accounting Advisory, KPMG in Canada To divest or go public. It is a simple proposition with complex considerations. No doubt, pursuing an initial public offering (IPO) is a viable option for private equity (PE) funds looking to raise cash from a portfolio asset they are not ready to part ways with, but like any major portfolio decision, it pays to go in with eyes wide open. Taking the IPO journey has its merits. Current market “ Going public is not a panacea for conditions are making it more difficult for funds to operate on a debt leverage model approach at the same levels of return. difficult times. As anyone who has As such, going public may be a mechanism to extract capital ventured down the IPO path can from the asset while maintaining ownership. attest, it only means trading one set of challenges for another.” The true cost of going public Even still, going public is not a panacea for difficult times. Economy of scale As anyone who has ventured down the IPO path can attest, It is one thing to say your organization wants to be public it only means trading one set of challenges for another. and another to be ready for the costs, compliance, and Whether raising a million dollars or a billion, going public public scrutiny that entails. The massive shift in the reporting means becoming beholden to new rules, processes, public environment alone can be a significant challenge for the shareholders and regulators. This can be unfamiliar territory under-prepared, as it demands significant financial reporting for funds that are used to working in a more autonomous capabilities, controls, IT infrastructure, human resource environment and selling acquisitions when the numbers deem considerations and governance that simply cannot be it best. -
Outside Financing Capacity
Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (1) An entrepreneur (borrower). An investment project requiring fixed investment I. The entrepreneur has cash on hand (or liquid securities) A < I. To implement the project the entrepreneur needs (borrows) I − A. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (2) If undertaken the project either succeeds: verifiable income R > 0. Or the project fails: yields zero income. Let p denote the probability of success. The project is subject to moral hazard. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions(3) The entrepreneur can exert high effort (work, take no private benefit), or zero effort (shirk, take a private benefit). Equivalently, the entrepreneur chooses between project with high or low probability of success. High effort yields p = pH ; low effort yields p = pL, with pL < pH . Denote ∆p = pH − pL. Low effort yields a private benefit B > 0 to the entrepreneur. (B can be interpreted as a disutility of effort). Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (4) Borrower and lenders (investors) are risk-neutral. For simplicity, there is no time preference: investors require an interest rate equal to 0 (at least). The entrepreneur is protected by limited liability (income cannot be negative). Competition among lenders drive interest and profit to zero. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions(5) The loan contract specifies how the profit is shared between borrower and lenders. -
Understanding Private Equity in the Healthcare Market June 2019 Table of Contents
UNDERSTANDING PRIVATE EQUITY IN THE HEALTHCARE MARKET JUNE 2019 TABLE OF CONTENTS SECTION PAGE I. BCA Introduction 1 II. Healthcare Market Dynamics 8 III. What is Private Equity? 13 IV. What is a Recapitalization? 17 V. Appendix 20 I. BCA INTRODUCTION BCA IS ONE OF THE LARGEST HEALTHCARE BOUTIQUE INVESTMENT BANKS KEY FACTS 19 $6.4 billion 1 PARTNER-OWNED Total Investment Bankers Total Transaction Value 90% 10.9x 2 RELATIONSHIP-DRIVEN Closure Rate Avg. EBITDA Mult. For Healthcare Services Deals Closed in 2018 3 HEALTHCARE-FOCUSED 100 $85 million Total Transactions Closed Average Transaction Size 4 RESULTS-ORIENTED RELEVANT HEALTHCARE SERVICES TRANSACTIONS Recapitalization Sell-Side Recapitalization Recapitalization Recapitalization RecapitalizationSell-Side Recapitalization Recapitalization Recapitalization Recapitalization Recapitalization Recapitalization Recapitalization Recapitalization Led By Led By Led By Sell-Side Advisory Recapitalization Recapitalization Sell-Side Advisory Led by Led by Led by Led By to Led by Led By to UnitrancheRecapitalization Debt RecapitalizationGrowth Equity RecapitalizationSell-Side Buy Side Recapitalization Sell-Side Recapitalization Recapitalization Recapitalization Recapitalization Acquired Recapitalization Debt-Private placement Equity Investment Sell-Side Advisory Recapitalization Led By Led By Led By Sell-Side Advisory Led by Led by Led By to Led by to $113,000,000 1 OUR HEALTHCARE INVESTMENT BANKING TEAM EXTENSIVE INDUSTRY KNOWLEDGE & EXPERIENCED INVESTMENT BANKERS 2 3 DEEP BENCH 1 TRANSACTION EXPERIENCE -
Portfolio Management Under Transaction Costs
Portfolio management under transaction costs: Model development and Swedish evidence Umeå School of Business Umeå University SE-901 87 Umeå Sweden Studies in Business Administration, Series B, No. 56. ISSN 0346-8291 ISBN 91-7305-986-2 Print & Media, Umeå University © 2005 Rickard Olsson All rights reserved. Except for the quotation of short passages for the purposes of criticism and review, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior consent of the author. Portfolio management under transaction costs: Model development and Swedish evidence Rickard Olsson Master of Science Umeå Studies in Business Administration No. 56 Umeå School of Business Umeå University Abstract Portfolio performance evaluations indicate that managed stock portfolios on average underperform relevant benchmarks. Transaction costs arise inevitably when stocks are bought and sold, but the majority of the research on portfolio management does not consider such costs, let alone transaction costs including price impact costs. The conjecture of the thesis is that transaction cost control improves portfolio performance. The research questions addressed are: Do transaction costs matter in portfolio management? and Could transaction cost control improve portfolio performance? The questions are studied within the context of mean-variance (MV) and index fund management. The treatment of transaction costs includes price impact costs and is throughout based on the premises that the trading is uninformed, immediate, and conducted in an open electronic limit order book system. These premises characterize a considerable amount of all trading in stocks. -
The Promise and Peril of Real Options
1 The Promise and Peril of Real Options Aswath Damodaran Stern School of Business 44 West Fourth Street New York, NY 10012 [email protected] 2 Abstract In recent years, practitioners and academics have made the argument that traditional discounted cash flow models do a poor job of capturing the value of the options embedded in many corporate actions. They have noted that these options need to be not only considered explicitly and valued, but also that the value of these options can be substantial. In fact, many investments and acquisitions that would not be justifiable otherwise will be value enhancing, if the options embedded in them are considered. In this paper, we examine the merits of this argument. While it is certainly true that there are options embedded in many actions, we consider the conditions that have to be met for these options to have value. We also develop a series of applied examples, where we attempt to value these options and consider the effect on investment, financing and valuation decisions. 3 In finance, the discounted cash flow model operates as the basic framework for most analysis. In investment analysis, for instance, the conventional view is that the net present value of a project is the measure of the value that it will add to the firm taking it. Thus, investing in a positive (negative) net present value project will increase (decrease) value. In capital structure decisions, a financing mix that minimizes the cost of capital, without impairing operating cash flows, increases firm value and is therefore viewed as the optimal mix.