public offering
DESCRIPTION
Public Offering. Wall Street “lingo” IPO underpricing and overpricing IPOs from abroad SEC filings. (last updated 31 Jan 13). "PR Newswire, June 30, 1995, Friday - PowerPoint PPT PresentationTRANSCRIPT
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Public Offering
Wall Street “lingo” IPO underpricing and overpricing
IPOs from abroadSEC filings
(last updated 31 Jan 13)
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"PR Newswire, June 30, 1995, Friday
"THE RATTLESNAKE HOLDING COMPANY, INC. (Nasdaq: RTTL) announced today that its initial public offering of Common Stock commenced on June 29, 1995.
STAMFORD, Conn., June 30 The offering covered 1,300,000 shares of Common stock (plus 195,000 additional shares to cover over-allotments) at an initial public offering price of $5.50 per share. The offering was underwritten on a firm commitment basis by Auerbach, Pollak & Richardson, Inc.
"Rattlesnake operates a chain of casual dining restaurants featuring a southwestern theme under the name "Rattlesnake Southwestern Grill."
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"PR Newswire, June 30, 1995, Friday
"THE RATTLESNAKE HOLDING COMPANY, INC. (Nasdaq: RTTL) announced today that its initial public offering of Common Stock commenced on June 29, 1995.
STAMFORD, Conn., June 30 The offering covered 1,300,000 shares of Common stock (plus 195,000 additional shares to cover over-allotments) at an initial public offering price of $5.50 per share. The offering was underwritten on a firm commitment basis by Auerbach, Pollak & Richardson, Inc.
"Rattlesnake operates a chain of casual dining restaurants featuring a southwestern theme under the name "Rattlesnake Southwestern Grill."
Initial public offering?
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"PR Newswire, June 30, 1995, Friday
"THE RATTLESNAKE HOLDING COMPANY, INC. (Nasdaq: RTTL) announced today that its initial public offering of Common Stock commenced on June 29, 1995.
STAMFORD, Conn., June 30 The offering covered 1,300,000 shares of Common stock (plus 195,000 additional shares to cover over-allotments) at an initial public offering price of $5.50 per share. The offering was underwritten on a firm commitment basis by Auerbach, Pollak & Richardson, Inc.
"Rattlesnake operates a chain of casual dining restaurants featuring a southwestern theme under the name "Rattlesnake Southwestern Grill."
Initial public offering?
Common stock?
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"PR Newswire, June 30, 1995, Friday
"THE RATTLESNAKE HOLDING COMPANY, INC. (Nasdaq: RTTL) announced today that its initial public offering of Common Stock commenced on June 29, 1995.
STAMFORD, Conn., June 30 The offering covered 1,300,000 shares of Common stock (plus 195,000 additional shares to cover over-allotments) at an initial public offering price of $5.50 per share. The offering was underwritten on a firm commitment basis by Auerbach, Pollak & Richardson, Inc.
"Rattlesnake operates a chain of casual dining restaurants featuring a southwestern theme under the name "Rattlesnake Southwestern Grill."
Initial public offering?
Common stock?
“Effective”?
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"PR Newswire, June 30, 1995, Friday
"THE RATTLESNAKE HOLDING COMPANY, INC. (Nasdaq: RTTL) announced today that its initial public offering of Common Stock commenced on June 29, 1995.
STAMFORD, Conn., June 30 The offering covered 1,300,000 shares of Common stock (plus 195,000 additional shares to cover over-allotments) at an initial public offering price of $5.50 per share. The offering was underwritten on a firm commitment basis by Auerbach, Pollak & Richardson, Inc.
"Rattlesnake operates a chain of casual dining restaurants featuring a southwestern theme under the name "Rattlesnake Southwestern Grill."
Initial public offering?
Common stock?
“Effective”?
“Green Shoe”?
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"PR Newswire, June 30, 1995, Friday
"THE RATTLESNAKE HOLDING COMPANY, INC. (Nasdaq: RTTL) announced today that its initial public offering of Common Stock commenced on June 29, 1995.
STAMFORD, Conn., June 30 The offering covered 1,300,000 shares of Common stock (plus 195,000 additional shares to cover over-allotments) at an initial public offering price of $5.50 per share. The offering was underwritten on a firm commitment basis by Auerbach, Pollak & Richardson, Inc.
"Rattlesnake operates a chain of casual dining restaurants featuring a southwestern theme under the name "Rattlesnake Southwestern Grill."
Initial public offering?
Common stock?
“Effective”?
“Green Shoe”?
Firm commitment?
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"PR Newswire, June 30, 1995, Friday
"THE RATTLESNAKE HOLDING COMPANY, INC. (Nasdaq: RTTL) announced today that its initial public offering of Common Stock commenced on June 29, 1995.
STAMFORD, Conn., June 30 The offering covered 1,300,000 shares of Common stock (plus 195,000 additional shares to cover over-allotments) at an initial public offering price of $5.50 per share. The offering was underwritten on a firm commitment basis by Auerbach, Pollak & Richardson, Inc.
"Rattlesnake operates a chain of casual dining restaurants featuring a southwestern theme under the name "Rattlesnake Southwestern Grill."
Initial public offering?
Common stock?
“Effective”?
“Green Shoe”?
Firm commitment?
Lead underwriter?
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Underwriting
Methods
Documentation
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Underwriting methods
Issuer
UW(investment bank)
Investors• Firm-commitment• Best efforts• Dutch auction
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Underwriting methods
Issuer
UWUW UW
Retail firm
Investors
Retail dept
• Firm-commitment
IPO price $20.00
Issuer proceeds $18.60
Spread (7%) $1.40
Managing UW 20%
Selling concession 60%
Expenses 20%
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Underwriting methods
Issuer
UW(investment bank)
Investors• Best efforts• Straight• Mini-max• All or nothing
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Underwriting methods
• Dutch auction (sell 1 million shares)
Issuer
Investmentbank
Investors
Bid # shares @ $ price
1 200,000 @ $50/sh
2 150,000 @ $45/sh
3 500,000 @ $40/sh
4 150,000 @ $35/sh
5 300,000 @ $30/sh
6 400,000 @ $25/sh
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Underwriting methods
• Dutch auction (sell 1 million shares)
Issuer
Investmentbank
Investors
Bid # shares @ $ price
1 200,000 @ $50/sh
2 150,000 @ $45/sh
3 500,000 @ $40/sh
4 150,000 @ $35/sh
5 300,000 @ $30/sh
6 400,000 @ $25/sh
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0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
1 50 99 148 197 246 295 344 393 442 491 540 589
Valuation
Nu
mb
er
of
Inv
es
tors
Dutch auction
clearingprice
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Underwriting documentation
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Underwriting documentation
Issuer
UWUW UW
Retail firm
Investors
Retail dept
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Underwriting documentation
Issuer
UWUW UW
Retail firm
Investors
Retail dept
Letter of intent
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Underwriting documentation
Issuer
UWUW UW
Retail firm
Investors
Retail dept
Letter of intent
Housekeeping
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Underwriting documentation
Issuer
UWUW UW
Retail firm
Investors
Retail dept
Letter of intent
Housekeeping
Agreementamong
underwriters
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Underwriting documentation
Issuer
UWUW UW
Retail firm
Investors
Retail dept
Letter of intent
Housekeeping
Agreementamong
underwriters
Underwriting agreement
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Underwriting documentation
Issuer
UWUW UW
Retail firm
Investors
Retail dept
Letter of intent
Housekeeping
Agreementamong
underwriters
Underwriting agreement
Comfort letters Issuer’s counsel
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IPO Pricing
Underpricing
Overpricing
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Rattlesnake Holdings
Date Price Event
6/28/95 -- SEC makes registration “effective”
6/29/95 -- IPO postponed when UW out of business
6/30/95 $5.50 IPO – 13MM shares / $7.15 MM raised
7/16/95 $6.13 One week after IPO (up 11.5%)
8/14/95 $5.88 Down 6.8%
8/21/95 $5.75 Down 4.5%
9/11/95 $5.50 Back to IPO price
12/29/95 $5.38 Down 2.5%
4/15/96 -- BW says industry overbuilt
6/17/96 -- 10Q – sales double, but lost $630,000
7/22/96 $2.75 Down 47%
7/24/95 -- Private placement - $125 MM
8/25/97 < $1.00 Delisted from NASDAQ
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“IPO phenomenon”
IPO
Market
First day of trading(avg = +16.4%)
Three years after IPO(avg = -27.4% compared to mkt)
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IPO Underpricing and DisclosureJAMES C. SPINDLER
University of Southern California Law School (May 2009)
Using a unique data set, I find that U.S. IPO prospectus disclosure dramatically affects the degree of first day underpricing of the new issue, consistent with theories of underpricing as caused by informational asymmetry.
In particular, a 1 standard deviation increase in positive prospectus disclosure is associated with almost a third reduction in first day underpricing.
Further, this may derive from disclosure-related litigation risk: an increase in negative prospectus disclosure is associated with an increase in subsequent IPO-related lawsuits, which suggests that less positive (or more negative) disclosure is a reaction to litigation risk.
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“IPO phenomenon”
IPO
Market
First day of trading(avg = +16.4%)
Three years after IPO(avg = -27.4% compared to mkt)
Why underpricing?(UWs as gatekeepers)
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“IPO phenomenon”
IPO
Market
First day of trading(avg = +16.4%)
Three years after IPO(avg = -27.4% compared to mkt)
Why overpricing?(ECMH)
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American Depositary Receipts
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Reuters Financial Service July 31, 1996, Wednesday
GRUPO RADIO CENTRO <RCN> OFFERING PRICED AT $ 7/ADS
NEW YORK, JULY 31 Grupo Radio Centro SA <RC.MX> said Wednesday the public offering of 3.7 million of its American Depositary Shares (ADSs) was priced at $ 7.00 per ADS. The shares were being offered in the United States and elsewhere outside Mexico by the company and certain selling shareholders.The selling shareholders include a Mexican trust controlled by the Aguirre family, the company's controlling shareholders, and Clemente Serna, a director of the company. Of the total shares offered, the company will sell about 1.5 million ADSs, the trust will sell 1.1 million, and Serna will offer 1.1 million. Each ADS represents nine of the company's CPOs, or Participation Certificates. The company said it plans to use its proceeds from the deal to repay a substantial portion of its debt. Bear Stearns and BT Securities are the managing underwriters of the offering, which is set to close August 2.
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Fraud (tort of deceit)• Material misrepresentation• Intentional (defendant aware
of truth)• Reliance (plaintiff relies
reasonably)• Misrepresentation is cause of
loss• Damages
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Fraud (tort of deceit)• Material misrepresentation• Intentional (defendant aware
of truth)• Reliance (plaintiff relies
reasonably)• Misrepresentation is cause of
loss• Damages
What is a “prospectus”?
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What is registration statement?
Netflix, Inc. (Form S-1)
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Integrated disclosure
’33 ActRegistration Statement[S-1, S-3]
’34 ActProxy
Statements[14A]
Reg S-K
Reg S-X
’34 ActPeriodicReports
[10-K, 10Q, 8-K]
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The end