Visa - The credit card company holds the record for the all-time largest U.S. IPO, raising $17.86 billion on March 18, 2008. Shares of Visa rocketed 28 percent in their first day of trading.
Three business-school professors [Craig Doidge, G. Andrew Karolyi, and René M. Stulz] looked at nearly 30,000 IPOs between 1990 and 2007 (mostly avoiding the current recession). They found that America's share of IPO proceeds fell from 30% in the 1990s to only 21% between 2000 and 2007.
Spinning is a term of art generally used on Wall Street to refer to the decision of an investment banking firm, acting as lead underwriter, to allocate shares of a hot IPO to the personal accounts of certain favored clients, such as CEO's or other senior executives of companies that are themselves potential IPO candidates. In turn, the CEO will "flip" -- that is, sell -- the shares and pocket the profit in his or her personal trading account. In the Internet-fueled IPO mania that prevailed for a brief period in the late 1990's, these profits could be substantial.
Flipping — Buying an IPO at the offering price and then selling the stock soon after it starts trading on the open market. Greatly discouraged by underwriters, especially if done by individual investors.
Investors cannot perfectly distinguish between good and bad firms, resulting in a share price that equals the expected value. Consequently, good firms tend to be undervalued and bad ones overvalued.
As far as the U.S. data goes back, numerous initial public offering (IPO) stocks have been
shown to experience extremely high first trading day returns (more popularly named as
underpricing, often ranged 15-18% on average). Interestingly this phenomenon was found almost
in any stock market
There exist two approaches to firm valuation. In direct valuation, the firm’s value is estimated from its fundamentals; in relative valuation, it is estimated from the prices of comparable firms.
An IPO is also probably the most expensive way to raise money in terms of the amounts you have to lay out upfront. The bills for accountants, lawyers, printing and miscellaneous fees for even a modest IPO will easily reach six figures.
A "road show" is a presentation by an issuing company to market its offered securities (typically through an IPO) to potential buyers or investors. The term "road show" is derived from the fact that the company's management, chaperoned by their investment bankers, usually make stops in several major cities over a couple week period where investors can sit in on the presentation and decide whether to buy the stock
The market timing theory argues that firms successfully conduct their IPO during a temporary 'window of opportunity', usually characterized by industry or market-wide share overvaluation that results in a lower cost of equity.
The managing underwriters may underwrite the IPO on either a firm commitment or best efforts basis. In a firm commitment offering, the underwriters will purchase the shares at a discount (of usually 7%) and resell them for the full public offering price to institutional and individual investors. In contrast, a best efforts offering means that the underwriters are only committing their best efforts to sell the shares.
The procedure involves an underwriting process by a syndicate formed by several investment banks. Each stock exchange will have its own set of governing rules which must be thoroughly respected. The advisory lawyers and bankers will have to draw up a rigorous set of documents including a prospectus. All business details and evaluation of the company will be thoroughly scrutinized.
A company usually begins to think about going public when the funding required to meet the demands of its business begins to exceed the company’s ability to raise additional capital through other channels at
The initial public offering (IPO) is the first sale of a stock by a private company to the public. IPOs are generally used by smaller companies raising capital to expand, but can be done by large private companies who want to be publicly traded.