In the USA, Dunbar (1998) examined unsuccessful US IPOs. Of the companies in his study that filed a registration statement with the Securities and Exchange Commission (SEC), 30 per cent didn't make it to market. There may have been a variety of reasons, both company-specific and relating to market conditions. However, less than 10 per cent returned and completed a successful IPO. This research suggests that a company only has one chance to get it right.

In determining what makes a deal successful, we first need to decide how we define success. A successful offering is one that meets the objectives of the three main parties to the deal: company, vendors and investors. There are numerous indicators of success, some of which are listed here:

• Reasonable first day premium

• Broad distribution

• Stable core holdings

• Minimal flowback

• Strong aftermarket share price performance

• Trading volume, market/investor confidence.

In pricing terms, an opening premium of approximately 10 to 15 per cent above the offering price keeps both vendors and investors happy. Vendors don't like to think that they've left too much money on the table, while investors are happy to show a modest initial return on their investment.

If both vendor and investor are happy with the price achieved, so will be the investment bankers (who are always conscious of serving two masters in IPOs and subsequent equity offerings).

On completion of an IPO, particularly large ones, the distribution of shares among investors is important. Companies will want...