Ipo ppt goupno .6

THE INITIAL PUBLIC OFFERING (IPO)By,

GROUP NO.6

ROLL NO. NAME

120 Madhuri s.Dolas

94Ruchita Gurav

136 Shantanu Shahasane

118 Mandar Desai

107 Mohit Singh[Team Leader]

2

Initial Public Offering (IPO)

Definition: A company’s first equity issue made available to the public.

This issue occurs when a privately held company decides to go public

Also called an “unseasoned new issue.”

Why do companies go public? New capital

Almost all companies go public primarily because they need money to expand the business

Future capital Once public, firms have greater and easier

access to capital in the future Mergers and acquisitions

Its easier for other companies to notice and evaluate a public firm for potential synergies

IPOs are often used to finance acquisitions

Is it a good time to do an IPO?

There are clear “windows of opportunity” that open and close for IPO issuers

Determinants of suitability: The general stock market condition The industry market condition The frequency and size of all IPO’s

in the financial cycle

Outline of the IPO process:

1. Select an underwriter2. Register IPO with the SEC/SEBI3. Print prospectus4. Present roadshow5. Price the securities6. Sell the securities

1. Select an underwriter

An underwriter is an investment firm that acts as an intermediary between a company selling securities and the investing public

The underwriter is the principal player in the IPO

Typically, the underwriter buys the securities for less than the offering price and accepts the risk of not being able to sell them

Types of underwriting

Firm commitment underwriting: The underwriter buys the entire

issue, assuming full financial responsibility for any unsold shares

Most prevalent type of underwriting in the U. S.

Best efforts underwriting: The underwriter sells as much of

the issue as possible, but can return any unsold shares to the issuer without financial responsibility

Leading IPO Underwriters

1. Goldman Sachs2. Morgan Stanley 3. Merrill Lynch

Intermediaries and their Roles

LEAD MANAGER

DOMESTIC & INTERNATIONAL LEGAL COUNSAL

AUDITORS

REGISTRARS

2. Register IPO with SEC

The firm must prepare a registration statement and file it with the SEC[US] /SEBI[INDIA]

The registration statement discloses all material information concerning the corporation making a public offering

3. Print prospectus

The prospectus is a legal document describing details of the issuing corporation and the proposed offering to potential investors

Contains much of the information in the registration statement

The preliminary prospectus is sometimes called a “red herring”

4. Present road-show

The road-show is presented to institutional investors around the country

The road-show allows firms to raise interest in the company and thus the price

Allows the firm and its underwriters to gather information from potential purchasers

5. Price the securities

How much to charge for giving away a part of the firm is very important to the issuers

The securities are priced based on the value of the company and expected demand for the securities

Examples of valuation methods: Net Present Value Earnings/Price ratios

6. Sell the securities

A full-fledged selling effort gets under way on the effective date of the registration statement

A final prospectus must accompany the delivery of securities

Average IPO returns over last 5 years

2009 2010 2011 2012 2013-50%

0%

50%

100%

150%

200%

250%

300%

Series 1

Series 1

Welcome

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The social networking company Facebook held its initial public off ering[IPO] ON MAY 18, 2012.

The IPO was one of the biggest in technology , and the biggest in internet history, with a peak market capitalization of over $104 bill ion.

Media pundits called it a “cultural touchstone.

The Initial Public Offering (IPO) refers to the first sale of these shares of stock.

Facebook, Inc. had offered 180,000,000 shares of its Class A common stock and the selling stockholders

are offering 157,415,352 shares of Class A common stock.

IPO

What Is an IPO?The usual customers that purchase IPO stocks are institutional investors, other banks and firms, who buy large blocks of stocks. Those institutions, in turn, sell the shares to individuals.

IPO

Let’s look at an IPO scenario… Facebook is valued at $104 billion.

$104 BILLION

What Is an IPO?Facebook had raised $16billion dollars in capital investment. So, the investment bank gets a 10% stake in Facebook.

$16 BILLION

The investment bank, working with Facebook, decided that an IPO stock price of $28 to $35 per share would be an ideal starting price. And in the market 337,415,352 Shares issued in IPO.

$16 BILLION

Facebook’s IPOLooking at the IPO chart shown previously, you’ll see that stock prices for IPOs have a characteristic shape.

DOES IPO AFFECT THE COMPANY’S ABILITY TO INNOVATE

Inventive People Cash Out The primary goal of an innovator is to have a successful exit and thereby cash out. A successful IPO is one lucrative form of exit. The result is that the company's most innovative persons leave the company.

Inventive People Keep Inventing, Elsewhere Here, there is also a departure of the company's most talented innovative types, but the reasons are not simply because of a big cash payday. Rather, innovative types begin to chafe at the more bottom-line driven focus of the company, especially where innovation becomes more incremental than fundamental.

In the words of Bernstein, “Imagine that you have a brilliant idea.” “It’s more attractive to explore that in a private setting where you are the owner, than in a public firm, where whatever ownership you had is now heavily diluted. They do seem to remain entrepreneurial,” he said — just not at the company their innovations helped build.

Management Clamps Down on Risky, Creative Work The emphasis is on change to the culture of risk-taking that spawned the innovative idea that propelled the company forward.

Why Build Innovation When You Can Buy It? Companies awash in post-IPO cash seem to have increasing preference to acquire companies rather than to continue to develop and innovate in-house. Indeed, Twitter, even pre-IPO, acquired 10 companies in 2012 alone. [I must confess I find this explanation a bit odd, since presumably acquired companies will also yield patents. In a world where collaborative innovation is all the rage, using IPO-generated funds to overcome the limitations of "non-invented here" seems a potentially good result.]

A few observations are in order here:

The report focuses on post-IPO activity but, over the past few years, most innovative companies exit by acquisition and the like rather than by going public. Indeed, there is more and more discussion that the venture capital industry is in dire straits. If we want to understand the factors that affect innovation, it seems that a complementary study focusing on other forms of exit is needed.

Given this, perhaps the "really next big thing" in this kind of analysis is to develop robust empirical measures that can meaningfully taken into account the variegated countenance of innovation in today's hi-tech world.

There is a danger in equating innovation with patent activity. While I understand that patent data

are convenient for conducting empirical research of this kind, in so

doing, the analysis may well miss substantial non-patent innovation, both pre and post-IPO. As such, in a

social media-mad tech world, patents may be a particularly dicey proxy for measuring innovation.

Disadvantages of the IPO

Expensive A typical firm may spend about 15-

25% of the money raised on direct expenses

Reporting responsibilities Public companies must

continuously file reports with the SEC/SEBI and the stock exchange they list on

Loss of control Ownership is transferred to

outsiders who can take control and even fire the entrepreneur

THE END…

Any Questions???