Corresponding to the primary market, most publicly issued shares enter the market by underwriting investment banking groups. According to the fact that banks buy their accounts at a discount from the issue price and then sell them at an agreed price, private equity investment can avoid some of these costs to some extent.
This phenomenon was introduced to the United States in the late 1990s, when the United States was experiencing the Internet bubble. Capital founders will set up an independent company and hope to raise funds through initial public offering (IPO) during the bull market. Because investors believe that these companies have a chance to become the next Microsoft, the stock price usually rises in the initial stage of listing. many
The founder became a millionaire overnight. Employees can also earn considerable income through stock options. In the United States, most initial public offerings will raise funds through stocks to be listed on Nasdaq. Many Asian countries
The company will raise funds to develop its business in a similar way. be
Comprehensive consideration of IPO:
Benefits:
Working capital, raising funds, and establishing a good reputation.
return
Personal venture capital
Disadvantages:
The cost of (possibly as high as 20%)
Companies must comply with the regulations of the US Securities and Exchange Commission.
Wall Street's Short-sighted Management Pressure
Out-of-control general process company IPO in the United States
Establish IPO team
Chief executive officer, chief financial officer,
Legal adviser to the US Securities and Exchange Commission.
lawyer
Select underwriters
Due diligence and first application
Roadshow pricing
Different attributes, industries, growth and financial characteristics of valuation models determine that listed companies apply different valuation models. At present, the commonly used valuation methods can be divided into two categories: income discount method and analogy method. The so-called income discount method is to evaluate the future operating conditions of listed companies in a reasonable way, choose the appropriate discount rate, and calculate the value of listed companies through the discount model. The most commonly used dividend discount model (DDM) and cash flow discount model (DCF). The discount model is not complicated, the key is how to determine the company's future cash flow and discount rate, which is reflected in the value of professional underwriting. The so-called analogy is the same proportion as the most commonly used price-earnings ratio (P/E is the share price/earnings per share), and the price-to-book ratio (P/B is the price /NAV of some listed companies), combined with new financial indicators, such as judging the value of the return on net assets per share of listed company shareholders, is generally used as a forecasting indicator. The law applicable to income has great limitations, such as requiring listed companies to achieve stable performance and not lose money, etc. However, these problems have no formal book value, but they also have defects, mainly relying too much on the company's book value rather than the latest market value. Therefore, for the current assets of these companies, such as banks and insurance companies, a high proportion is more suitable for this method. In addition to these indicators, valuation is also carried out through market value/sales revenue (P/S), market value/cash flow (P/C) and other indicators.
The theoretical value of the company can be reasonably estimated through the valuation model, but to finally determine the issue price, it is still necessary to choose the appropriate issuance method and fully discover the market demand. The most commonly used issuance methods include cumulative bidding, fixed price method and competitive bidding. Generally, bonds subject to public bidding are more common, so I won't go into details here. Cumulative bidding is one of the most popular IPO methods in the world at present, which means that the issuer determines the issue price through inquiry mechanism and issues shares independently. The so-called "inquiry mechanism" refers to the process that underwriters determine the IPO price range, hold roadshows and finally determine the issue price according to the problems, demands and price demand information repeatedly revised by the price. Usually 12 weeks. The inquiry process is the expression of investors' intention, and generally does not represent the final purchase commitment.
According to the inquiry mechanism, the issue price of new shares is not determined in advance, and the issue price is expected to be directly determined by fixed price according to the evaluation results and the demand of the lead underwriter for investors. The pricing method is simple but inefficient. China used to use fixed prices. On February 7th, 2004, the Securities and Futures Commission launched the IPO inquiry mechanism 65438, which took a key step in the market.
The future distribution method is determined and enters the formal distribution stage. At this time, if the effective subscription amount exceeds the planned issuance, it is not allowed to oversubscribe, and the subscription multiple is high, indicating that the investment demand is strong. In the case of oversubscription, according to the rules of the exchange, the underwriter can allocate shares or not, that is, the option of oversubscription. By exercising the over-allotment option, the issuer can realize the ideal shareholder structure. In China, at present, the lead underwriter does not have the right to place shares in proportion to the subscription. Among the various factors that the joint account book manager thinks will determine the allocation of the international offering, the principle of proportional allocation of the public offering in Hong Kong is stricter, and the basis of share allocation may be decided by different applicants and groups, but it is not excluded that it may be voting.
When oversubscribed, underwriters can also use the "over-allotment option" (also known as "green shoes") to increase the number of issues. "Overallotment" refers to granting options to the issuer's lead underwriter, and the issuer can be authorized within a certain period of time after a certain proportion of the sold shares are listed at the same price. If the market price is lower than the issue price, the lead underwriter will buy shares directly from the market, and this part suggests buying shares allocated to investors. If the market price rises below the issue price, it will be issued directly. In this way, you can maintain a relatively stable stock price in the stock market for a certain period of time, and at the same time, it is conducive to underwriting the issuance risk.