FIN 5130 Mini-case 2 Real World Application: IPOs This assignment will require you to obtain relevant...

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FIN 5130 Mini-case 2 Real World Application: IPOs This assignment will require you to obtain relevant information regarding IPOs. Important Websites/Information: 1. IPO Calendar (provided by Nasdaq): https://www.nasdaq.com/market-activity/ipos This link contains basic information regarding IPOs by companies (includes past and upcoming IPOS) 2. SEC filings: https://www.sec.gov/edgar/searchedgar/companysearch.html Enter the company name or ticker/CIK and get access to all company filings. We are interested in Form S-1 (which is the Registration Statement), Form S-1/A (the Amended Registration Statement, and Form 424B4 or 424B3 or 424B2 (contains information regarding the securities issued). Dr. Palkar 3. To quickly access SEC filings for an IPO company, you can go to IPO calendar provided by Nasdaq (see link in #1 above), select your IPO company, click on the company name, click on "Financials & Filings", scroll down to Company Filings, click on "Link" to go to that particular SEO filing. Yahoo! Finance website: https://finance.yahoo.com/contains information about post-issue price and stock data. 4. 5. The SEC's Office of Investor Education and Advocacy has issued an Investor Bulletin to provide investors with information they should consider when investing in the shares of a new public company. You will find useful beginner information about IPOs here: https://www.sec.gov/investor/alerts/ipo-investorbulletin.pdf 6. Calculating the direct costs of an IPO After a company's IPO registration statement has been declared effective, the company will typically file a final prospectus-usually identified as a 424B3 or 424B4 filing in the EDGAR database. The final prospectus generally includes information related to the final offering price. Go to SEC filings: https://www.sec.gov/edgar/searchedgar/companysearch.html. Enter the name of your company under Company Name and click on Search. Now click on Form 424B4 and open the htm document. Alternatively, to quickly access this data, you can click on the company name under IPO Calendar in Nasdaq.com website and then click on "Financials & Filings" to get the direct link to Form 424B4. Questions: a. The underwriting discounts and commissions per share represents the direct costs of an IPO to the company in dollars. b. You can calculate the underwriting discounts and commissions per share in percentages as follows: Underwriting discounts and commissions per share divided by Public offering price. 7. Calculating the indirect costs of an IPO The indirect costs of an IPO to the company is the money left on the table, defined as the difference between the adjusted closing price on the first day of trading and the offer price, multiplied by the number of shares sold. This is the first-day profit received by investors who were allocated shares at the offer price. It represents a wealth transfer from the shareholders of the issuing firm to these investors. Money left on the table = Indirect costs of an IPO = (Adjusted Closing price on the first day of trading - Offer Price) * number of shares sold Page 1 of 3 FIN 5130 Mini-case 2 6 points Real World Application: IPOs 1. What is an Initial Public Offering (IPO)? How does it differ from a Seasoned Equity offering (SEO)? 10 points 2. Say, you are interested in an IPO. How can you invest in an IPO? You will find the answer to this question here: https://www.sec.gov/investor/alerts/ipo-investorbulletin.pdf 4 points 3. Select a company that has issued an IPO from Nasdaq IPO Calendar (https://www.nasdaq.com/market-activity/ipos). Enter the name of your IPO company, the ticker symbol, the offer date, the offer price, and shares offered, under "Mini-case 2" Forum. 10 points 4. 10 points 5. Dr. Palkar Important Notes: a. You need to select an IPO company that has not already been selected by your classmates. Also, do not select the company - Oportun Financial Corp because we are using this company as an example under Practice Exercise 5. b. Do not pick an IPO prior to 1996. The Securities and Exchange Commission (SEC) started requiring companies to upload filings online starting 1996. So, you will not be able to find data for your selected IPO if you pick an IPO with an offer date prior to 1996. c. If you are unsure about which IPO you want to select, you can use one of the companies listed on the Nasdaq IPO Calendar. This website includes past and upcoming IPOs. Do not select upcoming IPOs as they are not yet completed so you will not have all the data. Provide a brief description of the company in a couple of lines in your own words. What is the Offer Price, number of shares offered, and the IPO date? You will get this information for your company from Nasdaq IPO Calendar. Upload a scanned image showing this information from the website. 20 points 6. What are the direct costs of an IPO to the company? Obtain your answer both in dollars and percentages. e. To quickly access this data, you can click on your selected IPO company's name under IPO Calendar in Nasdaq.com website and then click on "Financials & Filings" and scroll down to get the direct link to Form 424B4. d. The underwriting discounts and commissions per share represent the direct costs per share to the company in dollars. You can calculate the underwriting discounts and commissions in percentages as follows: Underwriting discounts and commissions per share divided by Public offering price. Upload a scanned image showing the underwriter commissions and offering price to public from Form 424B. Page 2 of 3 FIN 5130 Mini-case 2 Real World Application: IPOs Show your calculation for 6(b) 10 points 7. From Form 424B4, list all the underwriters and show how many shares each underwriter has decided to sell in an IPO. Click on "Underwriting" in the Table of Contents of the Form 424B4 to get the list of underwriters for this IPO. Dr. Palkar (if your selected company did not use underwriting, that's fine. State the same and provide evidence of where you find this information.) 10 points 8. Go to Yahoo! Finance website: Enter the company's ticker and then go to Historical Data. What is the adjusted Closing Price on the company's very first day of its trading? Upload a scanned image showing the date and the adjusted closing price. Hints: a. 20 points 9. What are the indirect costs of an IPO to the company? Money left on the table = Indirect costs of an IPO = (Adjusted Closing price on the first day of trading - Offer Price) * number of shares offered in the IPO You should have obtained Offer Price and number of shares offered in the IPO in Question #5. b. You should have obtained Adjusted Closing price on the first day of trading in Question #8. Show your calculation. While, on average, the IPOS are underpriced (that is, the first day closing price is higher than the offering price), not all IPO companies will exhibit these findings. You will find some IPO companies where the first day closing price will not be higher than the offer price. That's fine. You can use the same above formula and leave your answer as a negative number. Interesting fact: During 2001-2020, $101.57 billion was "left on the table" by 2,258 IPOs in the U.S. (https://site.warrington.ufl.edu/ritter/files/IPOs-Underpricing.pdf). Page 3 of 3 Mini-case 2 (State name of IPO company) All Sections In your post, enter Name of your IPO company, Ticker symbol, Offer date, Offer price, and Shares offered. For example, like this: Name: Oportun Financial Corp Ticker: OPRT Offer Date: 09/26/2019 Offer Price: $15 Shares Offered: 6,250,000 (See attached screenshot to give you an idea of how the data looks on Nasdaq IPO Calendar) Important Notes: 1. You need to select an IPO company that has not already been selected by your classmates. Also, do not select the company - Oportun Financial Corp because we are using this company as an example under Practice Exercise 5. 2. Do not pick an IPO prior to 1996. The Securities and Exchange Commission (SEC) started requiring companies to upload filings online starting 1996. So, you will not be able to find data for your selected IPO if you pick an IPO with an offer date prior to 1996. 2 3. If you are unsure about which IPO you want to select, you can use one of the companies listed on the Nasdaq IPO Calendar. This website includes past and upcoming IPOs. Do not select upcoming IPOs as they are not yet completed so you will not have all the data. OPRT-1-1.png FIN 5130 Mini-case 2 Real World Application: IPOs This assignment will require you to obtain relevant information regarding IPOs. Important Websites/Information: 1. IPO Calendar (provided by Nasdaq): https://www.nasdaq.com/market-activity/ipos This link contains basic information regarding IPOs by companies (includes past and upcoming IPOS) 2. SEC filings: https://www.sec.gov/edgar/searchedgar/companysearch.html Enter the company name or ticker/CIK and get access to all company filings. We are interested in Form S-1 (which is the Registration Statement), Form S-1/A (the Amended Registration Statement, and Form 424B4 or 424B3 or 424B2 (contains information regarding the securities issued). Dr. Palkar 3. To quickly access SEC filings for an IPO company, you can go to IPO calendar provided by Nasdaq (see link in #1 above), select your IPO company, click on the company name, click on "Financials & Filings", scroll down to Company Filings, click on "Link" to go to that particular SEO filing. Yahoo! Finance website: https://finance.yahoo.com/contains information about post-issue price and stock data. 4. 5. The SEC's Office of Investor Education and Advocacy has issued an Investor Bulletin to provide investors with information they should consider when investing in the shares of a new public company. You will find useful beginner information about IPOs here: https://www.sec.gov/investor/alerts/ipo-investorbulletin.pdf 6. Calculating the direct costs of an IPO After a company's IPO registration statement has been declared effective, the company will typically file a final prospectus-usually identified as a 424B3 or 424B4 filing in the EDGAR database. The final prospectus generally includes information related to the final offering price. Go to SEC filings: https://www.sec.gov/edgar/searchedgar/companysearch.html. Enter the name of your company under Company Name and click on Search. Now click on Form 424B4 and open the htm document. Alternatively, to quickly access this data, you can click on the company name under IPO Calendar in Nasdaq.com website and then click on "Financials & Filings" to get the direct link to Form 424B4. Questions: a. The underwriting discounts and commissions per share represents the direct costs of an IPO to the company in dollars. b. You can calculate the underwriting discounts and commissions per share in percentages as follows: Underwriting discounts and commissions per share divided by Public offering price. 7. Calculating the indirect costs of an IPO The indirect costs of an IPO to the company is the money left on the table, defined as the difference between the adjusted closing price on the first day of trading and the offer price, multiplied by the number of shares sold. This is the first-day profit received by investors who were allocated shares at the offer price. It represents a wealth transfer from the shareholders of the issuing firm to these investors. Money left on the table = Indirect costs of an IPO = (Adjusted Closing price on the first day of trading - Offer Price) * number of shares sold Page 1 of 3 FIN 5130 Mini-case 2 6 points Real World Application: IPOs 1. What is an Initial Public Offering (IPO)? How does it differ from a Seasoned Equity offering (SEO)? 10 points 2. Say, you are interested in an IPO. How can you invest in an IPO? You will find the answer to this question here: https://www.sec.gov/investor/alerts/ipo-investorbulletin.pdf 4 points 3. Select a company that has issued an IPO from Nasdaq IPO Calendar (https://www.nasdaq.com/market-activity/ipos). Enter the name of your IPO company, the ticker symbol, the offer date, the offer price, and shares offered, under "Mini-case 2" Forum. 10 points 4. 10 points 5. Dr. Palkar Important Notes: a. You need to select an IPO company that has not already been selected by your classmates. Also, do not select the company - Oportun Financial Corp because we are using this company as an example under Practice Exercise 5. b. Do not pick an IPO prior to 1996. The Securities and Exchange Commission (SEC) started requiring companies to upload filings online starting 1996. So, you will not be able to find data for your selected IPO if you pick an IPO with an offer date prior to 1996. c. If you are unsure about which IPO you want to select, you can use one of the companies listed on the Nasdaq IPO Calendar. This website includes past and upcoming IPOs. Do not select upcoming IPOs as they are not yet completed so you will not have all the data. Provide a brief description of the company in a couple of lines in your own words. What is the Offer Price, number of shares offered, and the IPO date? You will get this information for your company from Nasdaq IPO Calendar. Upload a scanned image showing this information from the website. 20 points 6. What are the direct costs of an IPO to the company? Obtain your answer both in dollars and percentages. e. To quickly access this data, you can click on your selected IPO company's name under IPO Calendar in Nasdaq.com website and then click on "Financials & Filings" and scroll down to get the direct link to Form 424B4. d. The underwriting discounts and commissions per share represent the direct costs per share to the company in dollars. You can calculate the underwriting discounts and commissions in percentages as follows: Underwriting discounts and commissions per share divided by Public offering price. Upload a scanned image showing the underwriter commissions and offering price to public from Form 424B. Page 2 of 3 FIN 5130 Mini-case 2 Real World Application: IPOs Show your calculation for 6(b) 10 points 7. From Form 424B4, list all the underwriters and show how many shares each underwriter has decided to sell in an IPO. Click on "Underwriting" in the Table of Contents of the Form 424B4 to get the list of underwriters for this IPO. Dr. Palkar (if your selected company did not use underwriting, that's fine. State the same and provide evidence of where you find this information.) 10 points 8. Go to Yahoo! Finance website: Enter the company's ticker and then go to Historical Data. What is the adjusted Closing Price on the company's very first day of its trading? Upload a scanned image showing the date and the adjusted closing price. Hints: a. 20 points 9. What are the indirect costs of an IPO to the company? Money left on the table = Indirect costs of an IPO = (Adjusted Closing price on the first day of trading - Offer Price) * number of shares offered in the IPO You should have obtained Offer Price and number of shares offered in the IPO in Question #5. b. You should have obtained Adjusted Closing price on the first day of trading in Question #8. Show your calculation. While, on average, the IPOS are underpriced (that is, the first day closing price is higher than the offering price), not all IPO companies will exhibit these findings. You will find some IPO companies where the first day closing price will not be higher than the offer price. That's fine. You can use the same above formula and leave your answer as a negative number. Interesting fact: During 2001-2020, $101.57 billion was "left on the table" by 2,258 IPOs in the U.S. (https://site.warrington.ufl.edu/ritter/files/IPOs-Underpricing.pdf). Page 3 of 3 Mini-case 2 (State name of IPO company) All Sections In your post, enter Name of your IPO company, Ticker symbol, Offer date, Offer price, and Shares offered. For example, like this: Name: Oportun Financial Corp Ticker: OPRT Offer Date: 09/26/2019 Offer Price: $15 Shares Offered: 6,250,000 (See attached screenshot to give you an idea of how the data looks on Nasdaq IPO Calendar) Important Notes: 1. You need to select an IPO company that has not already been selected by your classmates. Also, do not select the company - Oportun Financial Corp because we are using this company as an example under Practice Exercise 5. 2. Do not pick an IPO prior to 1996. The Securities and Exchange Commission (SEC) started requiring companies to upload filings online starting 1996. So, you will not be able to find data for your selected IPO if you pick an IPO with an offer date prior to 1996. 2 3. If you are unsure about which IPO you want to select, you can use one of the companies listed on the Nasdaq IPO Calendar. This website includes past and upcoming IPOs. Do not select upcoming IPOs as they are not yet completed so you will not have all the data. OPRT-1-1.png