Case Study #2 Easy Simple

FIN 5130 Mini-case 2Real World Application: IPOs
Dr. Palkar
This assignment will require you to obtain relevant information regarding IPOs.
Important Notes before starting the Mini-case:
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.
3. If you have a company in mind that you want to track for the Mini-case but don’t know the
exact IPO date, then just google on “Company IPO date”. For example, “Uber IPO Date” or
“when did Uber go public”. Once you get the date then go to Nasdaq IPO calendar and
complete the details required for the Mini-case. Again, remember, if your company went IPO
prior to 1996, you will not find the data so you will need to pick a different company.
4. 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.
5. You can upload with a Word document or Excel document – either is fine. Remember to
show your formula and calculations for questions 7, 9, and 10 – do not just type your final
answer.
Questions:
5 points
1. What is an Initial Public Offering (IPO)? How does it differ from a Seasoned Equity
offering (SEO)?
Also state the slide number from the handout notes in your explanation.
5 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
5 points
3. Explain in your own words the advantages and disadvantages of going public.
Also state the slide number from the handout notes in your explanation.
5 points
4. Select a company that has issued an IPO from Nasdaq IPO Calendar. Enter the name
of your IPO company, the ticker symbol, the offer date, the offer price, shares
offered, and the screenshot under “Mini-case 2” Forum. Enter this information in
your Mini-case 2 document as well.
Look at my example under Mini-case 2 Forum and submit similar information and
screenshot for your selected IPO company.
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FIN 5130 Mini-case 2
5 points
Real World Application: IPOs
Dr. Palkar
5. Provide a brief description of the company in a couple of lines in your own words.
Provide a reference of where you obtained this information from.
5 points
6. 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.
(if your selected company did not use underwriters, that’s fine. State the same and
provide evidence where you found it written in the form that the company did not
use underwriters.)
20 points
7. What are the direct costs of an IPO to the company? Obtain your answer both in
dollars and percentages.
After the company completes its IPO, it will submit all IPO completion details to SEC
generally via Form 424B4.
To quickly access Form 424B4 related to this IPO, 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.
a. The underwriting discounts and commissions per share represent the direct
costs per share to the company in dollars.
b. You can calculate the underwriting discounts and commissions in
percentages as follows:
Underwriting discounts and commissions per share/Public offering price.
Upload a scanned image showing the underwriter commissions and offering price
to public from Form 424B4.
Show your calculation for 6(b).
10 points
8. Go to Yahoo! Finance website: Enter the company’s ticker and then go to Historical
Data. What is the Closing Price on the company’s very first day of its trading?
Upload a scanned image showing the first date and first closing price.
Note: Under Historical Data, under “Time Period”, if you select “Max” and hit
“Apply”, Yahoo! Finance will display the data for all trading dates. From here, you
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FIN 5130 Mini-case 2
Real World Application: IPOs
Dr. Palkar
can scroll down to the earliest (i.e., first trading date or oldest) for your selected
company.
10 points
9. What are the indirect costs of an IPO to the company in percentages?
Underpricing% =
(Closing Price on first day of trading−Offer Price)
Offer Price
Hints:
a. You should have obtained Offer Price and number of shares offered in the
IPO in Question #4.
b. You should have obtained Closing price on the first day of trading in
Question #8.
Show your calculation.
10 points
10. What are the indirect costs of an IPO to the company in dollars?
Money left on the table = Indirect costs of an IPO =
(Closing price on the first day of trading – Offer Price) * number of shares offered in
the IPO
Hints:
a. You should have obtained Offer Price and number of shares offered in the
IPO in Question #4.
b. You should have obtained 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 2001-2022, $131.24 billion was “left on the table” by 2,608
IPOs in the U.S. IPOs-Underpricing
5 points
11. What is today’s (i.e., most recent or newest) closing price you observe for this
company?
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FIN 5130 Mini-case 2
Real World Application: IPOs
Dr. Palkar
Upload a scanned image showing the date and the closing price.
15 points
12. Suppose you bought 20 shares at the end of first day of trading and sold it today,
a. What is the dollar return on your investment?
b. What is the percentage return on your investment?
Upload a scanned image showing the date and the latest closing price.
Show your calculation.
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