A-Level Coursework: Business -- Corporate Finance

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[. . .] The company may decide to pursue IPO through traditional method described above with underwriters who look for "indications of interest" in order to set the number of shares and stock price. In this traditional method, a set number of stock is offered at a set price determined by the underwriters/company (Clinton, 2011). On the other hand, the company may decide to pursue IPO through auction-based (sometimes called "Dutch Auction") methods in which the company still uses an underwriter but without any share allocation. This nontraditional method allows investors to enter a bid for the price and the number of shares they wish to buy, probably bringing the stock price down from a price that the company sets higher than any expected bid to a price that bidders determine in lowered increments until all the bidders pay the amount of the bid given by the final bidder (Clinton, 2011).

There are numerous success factors -- financial and nonfinancial - for a firm making an IPO decision. Financial success factors are dominated by "debt-to-equity" ratios. Potential investors are looking for companies that are well funded, reducing and/or refinancing their indebtedness before going public (Ernst & Young Global Ltd., 2011). Another financial success factor -- particularly for the company itself -- is whether other alternatives are more desirable. Due to the risks and high stakes of IPO, companies should evaluate alternatives such as selling to "a strategic buyer," private placement, joint ventures or alliances (Ernst & Young Global Ltd., 2011). Nonfinancial factors noted by Ernst & Young Ltd. include: the credibility and experience of the company's management; the quality and apparent execution of the company's overall strategy; brand strength; and market position (Ernst & Young Global Ltd., 2011). Still other nonfinancial success factors focus on timing and mechanics. Those would include understanding the timing of the market for offering your IPO (Ernst & Young Ltd., 2008, p. 16), building the best possible team of people and institutions to take your company public (Ernst & Young Ltd., 2008, p. 19), managing relations and communications with your potential investors (Ernst & Young Ltd., 2008, p. 23), planning and running the best possible "road show" (Ernst & Young Ltd., 2008, p. 24), attracting the best possible investors and interesting the best/most influential analysts (Ernst & Young Ltd., 2008, p. 26), and the ability to actually keep the promises made along with road to your company's IPO (Ernst & Young Ltd., 2008, p. 28). In sum, success factors -- both financial and nonfinancial -- focus on a well-run, well-funded, well-networked company that can attract the greatest increase in capital and return on investment.

Module 1 Case Assignment was difficult but interesting. Realizing that financial experts devote their entire professional lives to obtaining a deep knowledge of even 1 aspect discussed in this paper, I was required to quickly scan and assess many factors involved in IPOs. Scanning a broad spectrum of the IPO process was quite interesting, as it gave glimpses of the factors and processes involved. It was also quite difficult because scanning that broad spectrum could not do justice to the deep knowledge and considerable work involved in achieving successful IPOs.

Works Cited

AVG Technologies. (2012, February 1). AVG Technologies N.V. Prices Initial Public Offering . Retrieved October 19, 2013 from mediacenter.avg.com Web site: http://mediacenter.avg.com/content/mediacenter/en/news/avg-prices-initial-public-offering

AVG Technologies. (2013). AVG - Security Technology | History. Retrieved October 19, 2013 from investors.avg.com Web site: http://investors.avg.com/phoenix.zhtml?c=250967&p=irol-history

Carter Chalk, A. (2005, January 9). Morningstar follows Google's lead. Retrieved October 19, 2013 from www.businessweek.com: http://www.businessweek.com/stories/2005-01-09/morningstar-follows-googles-lead

Clinton, L. (2011). Traditional IPO vs. auction-based IPO. Retrieved October 19, 2013 from www.essortment.com: http://www.essortment.com/traditional-ipo-vs.-auction-based-ipo-24886.html

Cody, C.M., & Traderstatus.com, LLC. (2013, May). SEC Fee Rates and Options Regulatory Fee. Retrieved October 19, 2013 from www.traderstatus.com Web site: http://www.traderstatus.com/secfeerates.htm

Ernst & Young Global Ltd. (2011, February 1). Debt levels, management credibility top factors of IPO success: EY. Retrieved October 19, 2013 from www.ey.com: http://www.ey.com/CA/en/Newsroom/News-releases/2011-IPO-success

Ernst & Young Ltd. (2008). Top 10 IPO readiness challenges. Retrieved October 19, 2013 from www.unternehmensfinanzierung.at Web site: http://www.unternehmensfinanzierung.at/static/cms/sites/unfin/media/de/pdf/studien-statistiken/ernst-young-top-10-ipo.pdf

Kamlet, A. (1995, November 7). The Investment FAQ | Subject: Stocks - Initial Public Offerings (IPO). Retrieved October 19, 2013 from invest-faq.com: http://invest-faq.com/articles/stock-ipo.html

SEC Office of Investor Education and Advocacy. (2013, February). Investor Bulletin | Investing in an IPO. Retrieved October 19, 2013 from www.sec.gov Web site: http://www.sec.gov/investor/alerts/ipo-investorbulletin.pdf [END OF PREVIEW]

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