Your SlideShare is downloading. ×
0
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Corporate finance the Initial Public Offering process
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Corporate finance the Initial Public Offering process

967

Published on

Presentation on the Initial Public Offering Process by Joel Dibeton, Johan Hellman, Jean Lemercier. GIves an overview of the different steps, stakeholders and regulatory constraints, as well as a real …

Presentation on the Initial Public Offering Process by Joel Dibeton, Johan Hellman, Jean Lemercier. GIves an overview of the different steps, stakeholders and regulatory constraints, as well as a real life example with the Facebook case.

Published in: Economy & Finance, Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
967
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. www.company.comInitial Public Offering – Logics and processesCorporate Finance class – IFI 2013Joel Dibeton – Johan Hellman – Jean Lemercier
  • 2. www.company.comWhat are the main goals of an IPO and the stockmarket? To guarantee access to capital market Externalize the debt To ensure investors are willing to buy stocks at the highest possible valueDo these statements agree with your company’s IPOdecisionsImportant or veryimportant (%)The IPO acts as advertising for thecompany and increases itsreputation/image83,11Making the IPO, we believed it wasthe best time to do it72,73The IPO is a normal « stage »in thegrowth of a company68,83The IPO has allowed your companyImportant of veryimportant (%)To increase financial flexibility 75,32To make the firm’s share more liquid andto increase the firm value75,32To finance investment opportunities 73,33BancelF., Mittoo U., « Why do European firms go public? », European Financial Management september 2009, vol. 15
  • 3. www.company.comPros and cons of an IPOAdvantages of an IPO For the company : Attractiveness of new partners Financial gains (capital raising, newdebt management possibilities …) Quality label, reassures investors For minority shareholders Access to liquidity and to information Protection of its interests Dividend policy For majority shareholders Benefits from liquidity without loosingpower Can bring out undesirable minorityshareholderDisadvantages of an IPO The strategy has to take into accountfinancial parameters More transparency and communicationconstraints Public companies tend to invest less thanunlisted companies. They are less reactiveto new investment opportunities
  • 4. www.company.comRegulatory constraintsFinancial transparency Mandatory and voluntary disclosures End of business confidentialityAccounting constraints Consolidated financial statements under IFRS rules Impairment testsQuestions from the market Activity, results, perspectives, management, shareholder compensationLock-up for historical shareholders Reduces risk of overhang
  • 5. www.company.comReorganization
  • 6. www.company.comAdvisory BanksGoal Structuring of the operation Link between the market and the companyReputation and assessment Relationship of trust between the investors and the bank Credibility of priceBanking syndicate Each advisory bank has it own role Global co-ordinator, bookrunner, co-lead managers, co-managers
  • 7. www.company.comChoosing a listing market Natural place : country of origin Presence on different markets
  • 8. www.company.comDifferent listing markets (France)Euronext Eurolist Alternext Marché libreTypes Blue chips andaverage valuesSMB / SMI Small companiesNature of themarketRegulated Non-regulated /« Régulé »Non-regulated /OrganizedApplication Issuer Issuer Issuer orshareholderSize box (Millions €) A : Capi>1000 ; B :150 <Capi<1000 ; C: Capi<150None NoneNature of theintroductionIPO IPO, privateplacement, directadmissionIPO, privateplacement
  • 9. www.company.comChoice of the operationPrimary transaction Capital increaseSecondary transaction Transfer of sharesMixHow to choose : Will to monetize all or a part of their participation Need of funds to finance growth or to reduce the debt Need to offer enough share to ensure liquidity
  • 10. www.company.comOther forms of IPODual track Same process as an IPO but enables the possibility to stop the process andreplace it with a private divestment Permits to choose the best solution in terms of price Mainly done for LBO or family companiesEquity carve out Parent company decides the pricing of an subsidiary Refocusing on core activity. Externalize the hidden value of the subsidiary
  • 11. www.company.comCosts incurred during an IPO Costs from structural factors (size, method used, type of market…) and fromsubjective factors (communication, providers…) Legal costs (AMF fees, admission and publication costs…) Roadshows (hotel, plane), meetings Estimated between 2% and 4% of the total cost (without banks)
  • 12. www.company.comThe stakeholders in the IPO processInvestment banks : acting as underwriters, they price the security and market it toinvestorsThe Security Exchange Commission (SEC, AMF for France) : Monitors the IPO(legal aspects, compliance and accuracy of statements)Lawyers : Due diligence work, prepare the documents for the legal authorities (SEC,NASD..)Auditors : Help the CFO address accounting issues, prepare the financial disclosuresneeded in the prospectus
  • 13. www.company.comThe IPO process – Preparatory work phaseThe Kick-Off meeting (auditors,bankers,lawyers and company management)Determining the roles of each party (lead manager,co-manager..) as well as the timingBeginning of the due diligence – Customer Calls/Suppliers, Industry/market, Legal(registration and contracts), Financial due diligenceDecide between underwriting and best effort basisIPO pitchIn depth analysis of the company and its position within the market, competitive advantage(s)Valuation (DCF,comparables..) S-1 Filling for the SEC (AMF prospectus)
  • 14. www.company.comThe IPO process – Pre-Marketing phaseThe pre-IPO analyst meeting (Warm-Up meetings)The team highlights the strengths of the company to analysts and other banks/institutionsIssue a red-herring (preliminary prospectus, usually without pricing) and present the “EquityStory”The team compiles feedback from Investors and the price they are prepared to pay for thecompanySEC (AMF) gives feedback regarding the S-1/AMF prospectus previously sent
  • 15. www.company.comThe IPO process – Marketing phaseRoad-shows and One to One meetingsManagement travels to major financial cities and market the company for 1-2 weeksS-1 form is amended and the final marketing documents are ready (forecasts, statements)The lead manager begins the book running (5 to 15 days) – taking orders from clients toestimate demand – with a fluctuation of +/-20% from the company’s estimated valueOfficial announcement for the closing of the order book
  • 16. www.company.comThe IPO process – Share Allocation phaseFixation of the price (given investors’ demand)If the deal is over-subscribed (“too much” demand), the banks will price the company at thehigh end of the range (opposite for under-subscribed IPOs)Tend to leave “some money on the table” for the stock to rise on its first days of tradingThe book runner and the company allocate shares to investorsFavour investors based on geographical location/investment objectives (repartition betweenshort/medium and long term)The objective is to keep the share price stable for the post IPO period (1month)Banks tends pushes to favour its most profitable clients to maximize profitsAt this point, 80 to 90% of the company floating is allocated in the market
  • 17. www.company.comThe IPO process – Trading phaseThe 10 to 20% capital remaining is allocated to individual investors on the market :Floating price (Banks fixes the price after registering orders on the trading system)Fixed price (same as the previously fixed price)Trading begins..
  • 18. www.company.comIPO risksThe underwriters :Counterparty risk (if the investors don’t want the security any longer after their order)Losing their clients if the security is overvaluedThe companyRaising less capital than expected in an adverse market situationThe InvestorsBuying an overvalued security
  • 19. www.company.comGreenshoe/Over-allotment Option Aim is to stabilize the price during the post IPO period (<30days) This gives the underwriter the right to sell 15% more shares than planned (thecompany lends 15% to the underwriter)Two scenarios : The price of the security fallsThe underwriter does not exercise the option – buys the securities (15% max) in themarket to limit the decrease – and gives back the shares to the company. The price of the security increasesThe underwriter exercise the option – buys the securities (15% max) from the company
  • 20. www.company.com
  • 21. www.company.comKey Features of the deal Deal size: $18bn  valuing FB at close $104bn Advising banks & Fee pool
  • 22. www.company.comThe Story
  • 23. www.company.com“Pre-Deal” Reluctant Zuckerberg Poised to be one of the hottest deal of thecentury (both in terms of size and hype) The race:Michael Grimes vs George Lee
  • 24. www.company.comThe Deal… a flopThe earnings guidance and disclosure issuesMorgan Stanley achieved full value for FB Price range: [$34-$38] High end First day support to stock: estimated $2bn Spectacular demand due the to secrecy
  • 25. www.company.comThe Post-Deal Crashing Stock Price Massachusetts Investigation
  • 26. www.company.comJust our two cents’Thank you

×