casestudy1207

casestudy1207 - IPO Process Slide: The Matrix Why List?...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
IPO Process 1 F:\Monash_Docs\Courses\AFF2701\EquityMarketCaseStudy1207.docx Slide: The Matrix Why List? Slide: Why List Companies have lots of reasons for listing their shares on a share market - and they come from a wide variety of starting points. In a minute I'll be talking about just one example, one that I've had an awful lot to do with over most of the last year. But before I start, some of the reasons for having shares listed on a stock exchange. Capital Raising The reason that's usually given is that it's where you got to raise capital. And it's true that a company that's listed on the stock exchange is rated more highly than one that's not. Putting it another way, there's a much larger pool of money looking for listed companies than there is for unlisted companies. So if a listed company wants to sell more shares to raise more capital, they're likely to find the task easier than an unlisted company would. We've all heard of the IPO of course, the Initial Public Offer - the moment when a company first goes public and lists on a stock exchange. And in a way you could say they've raised money by going public - although it really is a question of what comes first: given the hassle and the cost of getting listed, it's usually wisest for a company to have their money first - or at least to have some kind of insurance policy that guarantees their success. Which is what an Underwriting is: finding somebody who will, for a fee, give the company the money it's looking for. So that as often as not, at the point of the IPO it's the underwriter that's selling the shares to the public in the hope of a profit rather than the company itself. So capital raising is one of the reasons. Compliance Another reason, and one that's important to the regulator, is that companies will list simply so that there is what the Law calls a fair, transparent and orderly market for the sale of its shares. The nice thing about a public market is that all the transactions are public. It probably goes further than that: not just the sales are reported but the Law - and the stock market itself - impose a pretty heavy disclosure regime. Companies have to tell the market stuff. Especially stuff that
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
IPO Process 2 F:\Monash_Docs\Courses\AFF2701\EquityMarketCaseStudy1207.docx is likely to have an effect on the price of the shares, price sensitive information. This is such a big deal to a Stock Market that they may even require trading of a company's shares to be suspended to give investors a chance to digest new information. And that's another part of the reason why investors prefer listed companies over unlisted companies. There's a better chance of everything being open and above board in a public market. There are plenty of pretty large unlisted companies with plenty of shareholders, but there's always a danger that a shareholder will get suckered into buying or selling at an unfair price, simply because it isn't easy to find out what's there. And there's also a fair chance, in this sometimes ugly world, that
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/08/2011 for the course FINANCE 101 taught by Professor Jannis during the Three '11 term at Monash.

Page1 / 27

casestudy1207 - IPO Process Slide: The Matrix Why List?...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online