IPO and Equity Offerings
This book goes behind the scenes to examine the process of an offering from the decision to go public to the procedures of a subsequent equity offering.
TABLE OF CONTENTS IPO and Equity Offerings
The investors
Finally, investors wish to maximize share price performance after the flotation. This will be the product of both the traditional opening day premium and continued strong stock market performance on the part of the company's shares.
IPOs are ideal opportunities for investors to obtain a sizeable stake in companies that would not easily be found in the secondary market. The fact that the issuing company pays all commissions also helps the performance of an investor. To see how much an investor can potentially save, let's look at the following hypothetical example.
An investor has the choice of investing in two nearly identical companies: one through buying shares in new issue (either an IPO or secondary), the other through accumulating shares in the stock market.
In the first instance, the investor buys 500 000 shares in the new issue at $12.00 for an aggregate cost of $6 million. The investor incurs no additional costs there are no trading commissions on the purchase (the issuer pays them), there is no bid ask spread, and stamp tax (where applicable) is also paid by the issuer.
The alternative investment is already listed on the stock exchange. For simplicity, assume that the other company's shares are currently trading at $12.00. The investor may be paying $0.05 per share, or an aggregate commission of $25 000, plus a bid ask spread of say $0.02, or $10 000. Therefore, the investor's initial cost base for the shares would...
Copyright Ross Geddes 2003 under license agreement with Books24x7
