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IPO underwriting

 
Started by : Kundan Goswami, M & A Advisor, SBI Caps   09 25 2008 14:45:51 +0000
Industry : M&A/UnderwritingFunctional Area : Valuation(Corporate Finance)
Activity:  4 views;  last activity : 07 06 2010 20:18:09 +0000

An underwriter/investment banker (this word is commonly used these days for all the wrong reasons) is responsible for positioning, pricing and marketing your initial public offering (IPO) and therefore is critical to its ultimate success. Our responsibility as a IPO candidate should be to understand the various factors to be kept in mid before recruiting one.

 
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1 2 3
1 Buyer beware
2 Underwriting agreement
3 Post-IPO commitments

Buyer beware

idea posted by Kundan Goswami M & A Advisor, SBI Caps
Before one commits to a specific underwriter with a letter of intent, do the homework and check out your future partner. Although a letter of intent does not necessarily bind either party, it can prevent one from dealing with other underwriters for a stipulated period of time. Do not commit to such a letter until you are confident in your choice of underwriting partners.
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Underwriting agreement

idea posted by Sumit Adhikari M & A Advisor, JP MorganChase

In addition to the document mentioned in the previous idea, another document which is binding is the underwriting agreement. Under normal circumstances, it is not signed until within 24 hours of the expected effective date of the registration statement. By this time the underwriter has received purchase commitments or indications that are commonly well in excess of the offering size. For this document, the company will incur substantial expenses with no assurance that the offering will take place. So much research has to be done here.

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Post-IPO commitments

idea posted by Mahesh Nagpal M & A Advisor, JPMorgan Chase

After all the work has been done and your IPO has succeeded, there's still more work for your underwriter to complete. Post-IPO commitments are critically important to your company. Competent aftermarket support entails providing research data on your company and its competitors to the financial community, as well as financial advice. A quality road show should leave an unsatisfied demand level for your stock that will further help the aftermarket support and performance of your stock.

 

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