Session 3: IPOS Flashcards
1
Q
What are the benefits of a company being listed
A
- allows existing shareholders to cash out
- facilitates takeovers
- increases reputation
- broaden shareholder base
- payment of managers and employees
2
Q
Why do companies delist?
A
- cost of obligatory information
- taxes
- undervaluation by the stock market
- freedom of action for mgmt
- threat of hostile takeover
- firms become acquired
3
Q
Why are there fewer IPOS?
A
- fewer start up companies
- start ups now need less capital due to needing less physical assets
- access to private capital is easier via venture capital and private equity investors
- debt financing is very cheap
4
Q
The role of underwriters?
A
- provide advice
- setting an offer price
- selling the shares
5
Q
Reasons why banks underprice IPOS?
A
- asymmetric info and quality of firm
- agency relations
- institutional explanations
- behavioral explanation
