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IPOs

AGENDA

1 32 54

IPO

PROCESS

IPO

BASICS

GLOBAL

STATS

ADVANTAGE &

DRAWBACKS

MISCONCEPTIONS &

CONSIDERATIONS

CASE STUDYFACEBOOK

IntroductionExplaining IPOs and stock market

What is an IPO

When a company issues it shares to the general public for the

first time, it is called an initial public offering or an IPO

IPOs are often issued

by startups seeking

capital to expand or

large privately owned

companies looking to

become publicly

traded

WHERE DO YOU TRADE

STOCK ?

A stock exchange or bourse is an exchange where stock

brokers and traders can buy and sell stocks (also called shares),

bonds, and other securities

UNDERSTANDING IPOsDefining the entire IPO process

The firm decides to go public &

seek outside investment

The firm chooses an

underwriter (an investment

bank). The underwriter will

advice the firm on the type

of security to issue, help

with the pricing, the

marketing, and the

registration of the shares

on an organized exchange

The company submits a

detailed disclosure document

explaining its business,

financials, risks and

potential to SEC

1 32

Process

Process

Investor interest is gauged

through roadshows and other

marketing methods

Public trading on the stock

exchange begins

Based on investor interest

an opening price is determined

by the underwriter

4 65

Corporate

governance process

Make changes as

necessary to Board of

Directors & executive

management

24

months

before

IPO

21

months

before

IPO

18 months

before IPO15 months

before IPO12 months

before IPO9 months

before IPO

Mitigate risks

and address

the issues

Compliance with

laws and

regulation

Preparation of

financial history

Does IPO still make

more sense for future

of business

IPO Preparation Timeline-FY 15-17

IPO Pricing Methods

Fixed Price

Method

In the fixed price method, the

price at which the securities are

offered is fixed in advance

Book Building

Method

In the book building method, the

investors have to bid for shares

within a price band specified by

the issuer and the final price is

decided according to result of the

building

Combination

Method

In the combination method,

components of both the

methods-fixed price & book

building method are considered

GLOBAL IPO ACTIVITYQ1 2017 Global IPO activity and trends

Markets Q1

2017

369IPOs globally

Change on

Q1 2016

92% $33.7bProceeds

146%

Change on

Q1 2016

0

200

400

600

800

1000

1200

1400

2013 2014 2015 2016 Q1 17

IPO activity

Number of IPOs Proceeds US $b

39%

61%

Sources of IPOs

Financial sponsor- backed Former state-owned enterprises

Percentage

Of IPOs

Percentage

of proceeds

10.30%

0.30%

89.40%

Q1 2017

• Global equity markets were at

record highs with low volatility

• Q1 2017 was the most active

first quarter by global number of

IPOs since Q1 2007.

• In Q1 2017 there were 369 IPOs

raising US$33.7b, a 92% year-

on-year increase in number of

IPOs and 146% increase in

proceeds

• The highly anticipated IPO of

Snap Inc, raised US$3.9b,

making it the largest tech IPO

after Alibaba Group Holding Ltd.

• APAC region accounted for 70%

of global IPOs and 48% of

global proceeds in Q1 2017

Global IPO Activity 2017

Stock exchanges by highest total

proceeds

Sectors by highest number of

IPOs

IPOs largest by proceeds

New York

(NYSE)$9.6b

15IPOs

Industrials66 IPOs

$ 4.2b

Snap Inc.$3.9bTechnology

US

New York(NYSE)

Shanghai

(SSE)$6.5b

70 IPOs

Materials54 IPOs

$2.3b

Invitation

Home Inc.$1.8bReal estate

US

New York (NYSE)

Shenzhen

(SZSE and

Chinext)$4.2b

73IPOs

Consumer

products48 IPOs

$4.6b

Becle SAB de CV$0.9bConsumer staples

Mexico

Mexican(BMV)

Top IPO issuers Q1 2017by number of IPOs outside home country

Mainland China (4)

US(3)

Canada (2)

Israel (2)

Singapore (2)

Top IPO destinations Q1 2017By number of IPOs

Australia (4)

NASDAQ (3)

London (3)

Hong Kong (3)

NYSE (2)

Global IPO Activity 2017

31%

25%

16%

12%

9%

27%

30%

31%

28%

21%

42%

45%

53%

60%

70%

2013

2014

2015

2016

Q1 17

Regional Share By Number Of IPOs

46%

38%

19%

17%

37%

20%

31%

36%

29%

15%

34%

31%

45%

54%

48%

2013

2014

2015

2016

Q1 17

Regional Share By Proceeds

Americas EMRIA Asia-Pacific

Asia-Pacific, led by Greater China, was once

again the epicenter of global IPO activity in Q1

2017, domination on both number of IPOs and

proceeds. With the Chinese authorities increasing

the pace of IPO approvals to clear the extensive

backlog in the pipeline, the dominance is expected

to continue.

Regional Performance 2017

Benefits and Drawbacks of IPOSHow IPOs create opportunities or threats for different stakeholders

Huge Capital

Gains

IPOs usually take

place so companies

can gain huge

amount of capital for

business growth and

expansion

Valuation Boost

The capital injection

gives the company a

valuation boost

Merger &

acquisition

Its easier for other

companies to notice

and evaluate a public

firm for potential

synergies.

IPOs are often used

for finance

acquisitions

Future capital

Once public, firm

have greater and

easier excess to

capital in the future

Liquidity

Improves the

companies liquidity

situation by gaining

instant cash through

sale of shares

Benefits of IPO For Company

Benefits of IPO For Investors

• IPOs are attractive for investors as they are

perceived to be undervalued. Many companies

offer their IPO at low rates making them a

profitable investment which can help make quick

profits

• Short term investors look to benefit from the IPO

being undervalued and intend to sell within the

initial few days or hours of listing, making a

listing gain

• Long term investors buy stocks of a company

believing in growth ability of the company in the

long run with the mindset of holding on to them

for long term profits

• Loss of control by old investors and other

stakeholders

• Disclosure of financial and certain other

sensitive information becomes necessary

• Earning statements need to be published and

new investor relation approach needs to be

worked on as conflict of interest can arise

between shareholders and management

• IPOs can be very costly

• Scrutiny of leadership and management

• IPOs can be over or undervalued not reflecting

true value of the share

MANAGEMENT

Drawbacks of IPOs For Company

IPOs Misconceptions and Consideration Breaking stereotypes and creating awareness

Misconception About IPOs

• If you invest in IPOs of

well known companies

you are bound to make

a profit

• There are always listing

gains when IPO takes

place

• In IPOs, shares are

issued at a discounted

or undervalued price

Important Considerations During IPOs

• Consider the financial and

operational history of the

company

• Carefully look at the price

the IPO is being issued at

• Compare the price

prevailing in the industry

to the one being offered in

the IPO

CASE STYDYWhat gives Facebook its value

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Mark was still in college…

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Worldwide, there are over 1.19 billion Facebook users.

So if it was a country it would be 3rd largest in the world!

(Source: Facebook)

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Even in China, where it is forbidden, there are over 87 million Facebook

users.

(Source: Facebook)

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874 million already log in Facebook through mobile.

That represents an increase of 45 % year-over-year.

(Source: Facebook)

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728 million people log onto Facebook daily.

An increase of 25 % year-over-year

(Source: Facebook)

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Age 25 to 34, at 29.7% of users, is the most common age demographic.

But when talking about gender, Facebook users are 53% female and 47% male.(Source: Emarketer 2012)

Men Women

47% 53%

25 to 34years old

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Highest traffic occurs mid-week between 1p.m. to 3 p.m.

(Source: Bit.ly blog)

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300 million photo

uploads per day.

(Source: Gizmodo)

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5 new profiles are created every second. (Source: ALLFacebook )

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Every 60 seconds on Facebook:

- 510 comments are posted

- 293,000 statuses are updated

- 136,000 photos are uploaded

(Source: The Social Skinny)

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Average time spent per Facebook visit is 20 minutes.

(Source: Infodocket)

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This is the evolution of Facebook’s stock prices since 2013.

(Source: Yahoo Finance)

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