Fundamentals of    Business & Financial Journalism    Week 10: Initial Public Offerings & Wrap-up    Jeffrey TimmermansMon...
Initial Public Offerings    ✤   The sale of shares in a private (unlisted) company to institutional        and/or retail i...
The IPO process    ✤   Intention to list (announced by   ✤   Subscription levels        company)                          ...
Intention to list    ✤   Amount of cash to be raised     ✤   Relative sizes of the                                        ...
Indicative price range    ✤   Once mandated, the                   ✤   Check earlier reported details        underwriters ...
Subscriptions    ✤   Underwriters will usually try to ensure excess demand for the        number of shares on offer, or ov...
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Class10

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Class10

  1. 1. Fundamentals of Business & Financial Journalism Week 10: Initial Public Offerings & Wrap-up Jeffrey TimmermansMonday, 3 December, 12
  2. 2. Initial Public Offerings ✤ The sale of shares in a private (unlisted) company to institutional and/or retail investors ✤ A primary equity deal ✤ Results in the listing of company on one or more stock exchanges ✤ So those shares can trade on the secondary market ✤ Is an “exit strategy” for private equity firms that acquired a (formerly) public companyMonday, 3 December, 12
  3. 3. The IPO process ✤ Intention to list (announced by ✤ Subscription levels company) ✤ Final pricing ✤ Underwriter (investment bank) mandate ✤ Listing ✤ Pricing range ✤ Strategic investorsMonday, 3 December, 12
  4. 4. Intention to list ✤ Amount of cash to be raised ✤ Relative sizes of the institutional and retail tranches ✤ Which market it will list ✤ What the company does ✤ Number of shares to be issued ✤ Names, phone numbers of key ✤ Percentage of the company’s executives share capital to be listedMonday, 3 December, 12
  5. 5. Indicative price range ✤ Once mandated, the ✤ Check earlier reported details underwriters will start for changes “building the book” for the deal ✤ Compare price range to rivals ✤ Will sound out institutional investors on interest at a ✤ Is there a “greenshoe,” or range of prices overallotment option? ✤ Will distribute preliminary term sheetsMonday, 3 December, 12
  6. 6. Subscriptions ✤ Underwriters will usually try to ensure excess demand for the number of shares on offer, or oversubscription ✤ If investors apply to buy 100 million shares, but only 10 million are on offer, then the IPO is 10-times subscribed or covered (and 9-times oversubscribed) ✤ Excess demand at subscription stage typically results in sharp price rise once shares start trading on the marketMonday, 3 December, 12

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