differential ipo returns of dhaka stock exchange
... A common concept used in the world of finance is the Initial Public Offering or in short known as IPO. ... IPO is one of the many aspects of the capital market. ... The concept of IPO is popular in our country. It has become popular with the growth of the stock exchange. ... With the psychology of people changing on taking risks in investing in the once non-existent stock market, companies have found it easier to go for IPO which are unseasoned new issues. Moreover the understanding of IPO is easy for people to understand and thus they accept these IPO easily. One thing must be mentioned that the IPO boom occurred during the period of the mid nineties where the economy was at its peak and companies required capital to expand. Most companies provided with lucrative share returns and thus the IPO returns were high. Unfortunately the unregulated trading of shares led to the stock market scandal and thus the IPO of companies after that were not lucrative on paper. To a common person the IPO returns are just a result of market conditions. In reality there are other reasons for these returns. ... Though we have not studied issuing securities to the public separately in our financial management course and therefore, have limited knowledge on the subject; yet we have tried to discover what the effects and reasons behind the IPO at Dhaka Stock Exchange, what its opportunities in Bangladesh are and what are the possible obstacles. ... Objectives The primary purpose of this assignment was to know about the IPO and the mechanisms behind it. it was also our intention to find out the forces and factors hat influenced the IPO of the companies in the market, focusing primarily on the existing procedures and practices. We wished to achieve the following objectives in this report: Identifying formal aspects of IPO in our country. Learning about the existing policies and procedures regarding IPO in our country and enhancing our knowledge. ... Trying to evaluate the effects of IPO on stock prices in our country. To find out the forces affecting IPO. To provide a comparative analysis of IPO in the different industries. Scope The scope of our report is as follows: The IPO investigated are of Bangladeshi companies only. ... Only companies listed in the Dhaka stock Exchange were only considered. IPO – What it really is? An IPO (initial public offering) is a first and one-time only sale of publicly tradable stock shares in a company that has previously been owned privately. An IPO is also sometimes known as "going public." Technically, an IPO is the offering to sell but virtually all IPOs result in all the stock offered being sold. IPOs are generally managed by companies that specialize in handling IPOs and have experience in determining what the likely IPO offering price should be. If the IPO manager determines that the stock will not sell at an offering price that is acceptable to the company, the application for an IPO is usually withdrawn until a better time. As soon as all shares of an IPO have been sold, the stock is now tradable through stock exchanges or specialists that trade in the stock and the stock price may go up or down. As the title implies, an initial public offering, or IPO, actually puts the companys stock in the publics hands. All stocks that are traded on major stock exchanges undertook their own IPOs at one time, an essential process in having their stock listed on the exchange in the first place. ... The typical (firm-commitment) IPO raises $20-40M, but offerings of $100M are not unusual either. ... Typically, about a third of all IPO issuers return to the public market within 5 years to issue a "seasoned equity offering" (the term secondary is used to denote shares sold by insiders rather than by firms). Those that do return raise about three times as much capital in their seasoned equity offerings as they raised in their IPO. ... After the typical IPO, about 40% of the company remains with insiders, but this can varies from 1% to 88%, with 20% to 60% being comfortably normal. ... Reporting and Judiciary Responsibilities Public companies must continuously file reports with the SEC and the exchange they list on. They must comply with certain state securities laws, and exchange guidelines. ... IPO Expenses An IPO is a costly undertaking. ... Immediate Cash-out Usually Not Permitted Typically, IPO entrepreneurs face various restrictions that do not permit them to cash out for many months after the IPO. Legal Liability All IPO participants in the coalition are jointly and severally liable for each others actions. In practice, this mean that they were routinely sued for various omissions in the IPO prospectus when the public market valuation fell below the IPO offering price. How does an IPO proceed? ... The underwriter markets the new stock sale on the companys behalf, selling stock to its institutional and retail clients. ... To aid them in the process of selling the stock to their clients, the underwriters will enlist the help of company executives themselves in a country-wide road show, where company and brokerage executives will make presentations to prospective investors and advise them on the investment merits of the stock that is for sale. Much of the success (or lack thereof) of the IPO is dependent on the competence of the companys chosen underwriter, as there are many considerations in deciding how to price the IPO and in how many shares to issue.