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Posted in Community :

IPO underwriting

 
Started by : Kundan Goswami, M & A Advisor, SBI Caps   09 02 2008 22:48:50 +0000
Industry : M&A/UnderwritingFunctional Area : Valuation(Corporate Finance)
Keywords : IPO Fail Auctions
Activity:  4 views;  last activity : 07 06 2010 20:18:09 +0000

The debate over the reform of the IPO process has focused mainly on replacing bookbuilding with standard auctions. But why auctions are losing out to the seemingly inferior bookbuilding method and fixed-price public offers as the preferred ways to conduct IPOs.

 
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1 Reluctance on the part of issuers to try a new experimental method
2 Pressure from investment banks to use bookbuilding.

Reluctance on the part of issuers to try a new experimental method

idea posted by Kundan Goswami M & A Advisor, SBI Caps
IPO auctions were used as an alternative to traditional, fixed-price public offers in Italy, Portugal, Sweden, Switzerland, and the United Kingdom in the 1980s, and in Argentina, Malaysia, Singapore, and Turkey in the 1990s. However, they were abandoned in all of these countries long before bookbuilding was introduced from the United States. Hence, the rarity of IPO auctions cannot be due to unfamiliarity.

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Pressure from investment banks to use bookbuilding.

idea posted by Vishnu Prasad M & A Advisor, JP MorganChase
More convincing is the suggestion that investment banks have pressured issuers to use bookbuilding because they garner higher fees.
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Hey very nice article and some cool points....and the last line is too good, and thanks for sharing.....
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