Professional Documents
Culture Documents
MBA 2nd
sem Cosmic
Business
School
Somendr
a Tripathi
Why Go Public? Going public raises cash and usually a lot of it.
Being publicly traded also opens many financial doors:
Once all sides agree to a deal, the investment bank puts together a
registration statement to be filed with the SEC. This document contains
information about the offering as well as company info such as financial
statements, management background, any legal problems, where the
money is to be used and insider holdings.
As the effective date approaches, the underwriter and company sit down
and decide on the price. it depends on the company, the success of the
road show and, most importantly, current market conditions. Of course,
it's in both parties' interest to get as much as possible.
Usually there are two methods for this purpose..
1- price fixed before the issue- The offer price for shares in a
public offer can be fixed before the issue. It can also be discovered by
gauging the demand in the market for shares at various price points.
2- book building method- In this, the issue manager fixes a price-
band rather than a single price for the IPO and asks investors to bid for
shares in that price range. The price band is fixed on the basis of the
fundamentals of the company, the performance of share prices of other
companies in the same sector on bourses and market survey conducted
by issue managers.
Book Building is basically a capital issuance process used in Initial
Public Offer (IPO) which aids price and demand discovery. It is a
process used for marketing a public offer of equity shares of a company.
It is a mechanism where, during the period for which the book for the
IPO is open, bids are collected from investors at various prices, which
are above or equal to the floor price. The process aims at tapping both
wholesale and retail investors. The offer/issue price is then determined
after the bid closing date based on certain evaluation criteria.
PRICE LEVELS
An investor can bid for shares at various price levels. Normally
the demand for shares at the minimum price level is maximum.
But when the market is booming, the issue is often
oversubscribed at the higher end of the band itself. In such a
case, the offer price is ultimately fixed at the upper end of the
band.
INITIAL PUBLIC
OFFERING
RELIANCE POWER
IPO
MORE INFO
METHODS OF
PAYMENT
RISKS