Finance HW

Presentation:

Your reports should include your name, and the IPO Company that you have investigated. Also include numeric analysis (or printouts of your Excel worksheet) and your interpretation listed in the outline.

Analytical outline:

The purpose of this study is to gain more insights into the mechanisms of IPO markets and the principal issues that IPO market participants commonly face, based on publicly accessible data.

1. Selection of an IPO

From the mater list of IPOs between 1997 and 2008 (shared via One Drive), select a company that is of interest to you and enter your name into the master file (you will supply other information about the company later on). Based on the Ticker of the company, find the Form S-1 (or Form SB-1 if for a small firm) IPO prospectus from EDGAR’s website: http://www.sec.gov/edgar/searchedgar/companysearch.html

Note: Form S-1 requires companies to provide information on the planned use of capital proceeds, detail the current business model and competition, as well provide a a brief prospectus of the planned security itself, offering price methodology, and any dilution that will occur to other listed securities. As an example, you may find Alibaba’s IPO prospectus online at http://www.sec.gov/Archives/edgar/data/1577552/000119312514184994/d709111df1.htm#toc

2. Why would the company go public? Was the time right to do an IPO?

Read through the IPO prospectus, in particular, look into the “Management Discussion and Analysis (MD&A)” section to examine the business plan. Discuss why such an IPO was deemed to be necessary by the firm. Any insights about the company’s view of market opportunities, industry environment (products, competitors), risk and uncertainty (business, legal, financial)?

3. What advisors the firm hired?

Record information about consultants, auditors, layers, underwriters, and printers if any. What are the costs/fees for them? Which one you believe placed the most important role during the preparation of the IPO? Since we are examining retrospectively, was there any seasoned equity offering after this IPO? If so, did the company use the same underwriter?

4. What was the Offering Price and number of shares offering? Was there any changes before the actual listing?

5. How did the market react to the IPO?

1) The short-run IPO return

Find the beginning price and ending price when the market started trading, and calculate the one-day return from the offering price to the ending price on the first trading day. What was the 1st day return of your IPO Company? Were there money left on the table?

2) The long-run performance

From Yahoo!Finance, find the Adjusted Ending price three years and five years after the IPO listing day, and calculate the holding period return (HPR) from the offering price to 3-year and 5-year post-IPO trading price. What was the holding HPR of your IPO company over these time periods?

Record your short-run and long-run IPO returns in the shared Master file on One Drive (we will be using this pool of IPOs to find the mean value of the IPO market returns).

H&E Equipment Services Inc. IPO date is 1/30/2006. PERMNO is 91080.