AFIN353-Advanced Corporate Finance
In topic 6, we introduced the process of raising equity through an Initial Public Offering (IPO), the associated challenge of determining the offer price, the role of the underwriters, the costs of the IPO and performance after the IPO is completed.
You are required to obtain the prospectus for one Australian IPO (listing on ASX) completed between January 2016 and December 2018 to evaluate the IPO objectives, pricing and outcomes. You can choose any IPO but don’t use companies from the mining sector or listed funds. It is always a good idea to study on a large cap IPO because of the higher availability of information.
Your report must address the following for the IPO:
a) Describe the motivations for the IPO, the price-setting process and underwriting arrangements.
b) Analyse and critique the capital structure (before and immediately after the IPO) and the appropriateness to a firm in this industry.
c) Analyse the offer price and provide your opinion of the reasonableness of the offer price (with regard to the prospectus information and your estimate of the firm’s value).
d) Measure the performance of the IPO and critique the IPO success with regard to the original objectives and the costs to the pre-IPO shareholders with regard to any under-pricing.
You should conclude as to the relationship between value creation in an IPO, a firm’s growth, optimal capital structure and accounting profitability with regard to IPO strategy.
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