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
Sale by existing shareholders
There are numerous reasons why existing shareholders may wish to sell part or all of their shareholding through flotation. As noted above, in some markets a sale by existing shareholders is referred to as a secondary offering. In secondary offerings, no new shares are sold and the company receives no cash. With the exception of privatizations, very few IPOs are purely secondary offerings. Existing shareholders usually piggyback on a primary offering. Reasons for secondary sales include:
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Sale by entrepreneur
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Succession
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Tax and other personal reasons
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Cashing in
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Sale by professional investors
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Venture capitalists and private investors seeking an exit
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Reverse LBOs
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Funds required by parent company/major shareholder
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Equity carve-outs
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Demergers (spin-offs)
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Demutualizations
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Privatizations of state-owned enterprises.
Sale by entrepreneur
Investors look very closely at the reasons behind the sale of shares by the founding entrepreneur or founding management group. They know that these insiders have better knowledge of the business and its prospects than anyone, and are rightly suspicious of the timing of any sale.
Succession
Succession is the cause for the flotations of many small-and medium-sized companies. Flotations resulting from succession factors increased during the late 1990s, particularly in continental Europe. If younger members of the owner's family have no interest in, or aptitude for the business, the owner may sell the company. Many entrepreneurs prefer to introduce professional (i.e. non-family) managers and float the company, rather than sell the company to a competitor.
Tax reasons
In order to encourage the development of their capital...
Copyright Ross Geddes 2003 under license agreement with Books24x7
