Case Study Of IPO Market

— Often, venture capital firms preserve an appropriate percentage of their funds to participate in follow-on fund raisings

The first proposal was from Electra Networks. They aim to deliver phone services through the internet or VOIP. The company has projected a large market segment but the market is now saturated. They were able to raise capital through three rounds of financial funding. The company’s previous valuation was $125 Million but the current valuation was not presented. Also they have power house management team which has strategic alliances with other companies on the industry. Currently, they are anticipating for IPO.

Publicly traded companies are subject to the reporting and disclosure requirements of the Securities Exchange Commission (SEC). The laws that govern the securities industry were established to provide transparency to investors, creditors and shareholders alike. According to Hoyle, Schaefer & Doupnik, (2015) there are seven major disclosure requirements, the first being a five-year summary of operations to encompass sales, assets, income from continuing operations. Followed by a description of business activities, a three year summary of industry segments to include foreign and domestic operations, a list of company directors and executives, quarterly market price of common stock for the last two years, restrictions on the company’s ability to continue paying dividends, and finally, an analysis of the company’s financial condition, changes in the conditions and results of operation.

The management of JetBlue and its underwriters can also price the IPO using valuation multiples. JetBlue can employ the most current comparable data of the most appropriate competitors in terms of value in the airline industry. Valuation multiples that can be employed include, but are not limited to P/E multiples, EBIT multiples, EBITDA multiples. In this scenario, I choose to use Southwest airlines and Ryanair as the major benchmarks, because they are both considered as major low –fare airlines, and are key competitors in the United States and Europe. Nevertheless, I believe the P/E ratio is the stronger valuation tool to determine the true value of a firm. Using this method we come up with a share price of $19.32 for Southwest

The share price of $270,000 was significantly higher because the “fair value” as perceived by the dissenters, which accounted for the chance of an IPO. Taking into account the recently traded Kohler Co. share prices, the book value of a share, and the possibility of an IPO greatly inflated what the perceived value of each share should be. While Kohler believed their voting control and ownership structure would remain the same, the shareholders believed otherwise. Because shareholders assumed Kohler would go public, they argued for a higher valuation so as to receive the highest price, and thus profit, in the buyout.  So based on the highest MVE, we picked Masco as the comparable firm of choice. Using Masco’s MVE, $9838.8, and LTM EBIAT, $437.3, we solved for Masco’s P/E ratio, which was equal to 22.5. By multiplying the P/E ratio by Kohler’s LTM EBIAT (22.5 * $93.76), we projected a market value of $2,109,610,000.  To solve for estimated share price, we divided the projected market value by 7,587.89, the number of shares outstanding to obtain an estimated share price of $278,023.47. This estimate is near the $270,000 per share offer price.

* The market is extremely unpredictable and an unsuccessful IPO can result in a great loss of time as well as money for the company

Weaknesses—ICOS had no marketing skills, new comer into the market, no market share, no brand recognition, no safety reputation established yet, not a self-sufficient biotech company at the time

Group Case: JetBlue IPO Valuation
Finance 6806, Fall 2014

Abrar Khayyat
Rajesh Maraj
Veronica Paez

November 10, 2014

When firms go public, their capital structure reflects a number of factors, including market-to-book, asset tangibility, size, and research and development intensity. As firms age, the cross-section of leverage is more and more explained by past financing opportunities, as determined by the market-to-book ratio, and past opportunities to accumulate retained earnings, as determined by profitability. Historical within-firm variation in market-to-book, not current cross-firm variation, is more

(1) According to the case, global IPO activity during the first quarter of 2012 fell to $14.3 billion, which was dramatically down from $46.6 billion during the first quarter of 2011. In addition, we can see in Exhibit 5 that IPO activity in US have dropped sharply since the second quarter of 2011. Number of deals dropped from 383 in the second quarter of 2011 to 157 in the first quarter of 2012.

As our point of view, though IPO will lead to short-term ups and downs of stock price, it will eventually reflect the real values of the company in the long run, consisting the stock price with its long-term performance.

Because it’s not clear exactly when the new net worth standard would have impacted the angel market – The SEC says the change “was effective upon enactment” of the Dodd-Frank law in 2010, but the agency adopted “amendments to the accredited investor standards in its rules” in 2011, and set 2012 as the effective date for the new rules – I also looked at whether the numbers of angel investors and angel-backed companies declined in 2010, 2011, or 2012. The CVR data show that both the number of investors and the number of angel-backed companies increased between 2009 and 2010, 2011 and 2012.

(Q1) Janet Richards and Gilbert Baker own a small firm named InterCat. The firm specializes in the creation and maintenance of Internet catalogues aimed at small businesses. It currently employs around 50 people, most of whom are computer programmers and analysts that follow the high technology market closely. As partners of the firm, they have decided to continue growing and to capture new business from its competitors. To do so, they have decided to start the process of making an initial public offering (IPO). The goal is to start this process as quickly as possible for several reasons, including becoming first to market to capture most of the market share, obtaining a good stock price, and to be one of the few private firms in the

That the share price has been so volatile is a measure of the risk in instigating an IPO in relatively uncharted waters.

This is the twelfth H-share issue on the HKEX. Total 1,080 million “H” shares would be offered and the total market capitalization is HK$1,575 million.