1. Fundamentals of
Business & Financial Journalism
Week 10: Initial Public Offerings & Wrap-up
Jeffrey Timmermans
Monday, 3 December, 12

2. Initial Public Offerings
✤ The sale of shares in a private (unlisted) company to institutional
and/or retail investors
✤ A primary equity deal
✤ Results in the listing of company on one or more stock exchanges
✤ So those shares can trade on the secondary market
✤ Is an “exit strategy” for private equity firms that acquired a (formerly)
public company
Monday, 3 December, 12

3. The IPO process
✤ Intention to list (announced by ✤ Subscription levels
company)
✤ Final pricing
✤ Underwriter (investment bank)
mandate ✤ Listing
✤ Pricing range
✤ Strategic investors
Monday, 3 December, 12

4. Intention to list
✤ Amount of cash to be raised ✤ Relative sizes of the
institutional and retail tranches
✤ Which market it will list
✤ What the company does
✤ Number of shares to be issued
✤ Names, phone numbers of key
✤ Percentage of the company’s executives
share capital to be listed
Monday, 3 December, 12

5. Indicative price range
✤ Once mandated, the ✤ Check earlier reported details
underwriters will start for changes
“building the book” for the deal
✤ Compare price range to rivals
✤ Will sound out institutional
investors on interest at a ✤ Is there a “greenshoe,” or
range of prices overallotment option?
✤ Will distribute preliminary
term sheets
Monday, 3 December, 12

6. Subscriptions
✤ Underwriters will usually try to ensure excess demand for the
number of shares on offer, or oversubscription
✤ If investors apply to buy 100 million shares, but only 10 million are on
offer, then the IPO is 10-times subscribed or covered (and 9-times
oversubscribed)
✤ Excess demand at subscription stage typically results in sharp price
rise once shares start trading on the market
Monday, 3 December, 12