II. Initial Public Offering (IPO) process
The company which is going to issue shares to the publics holds an organizational meeting to reach an agreement in final decision of purpose, size of offering, number and type of shares authorized, also the agreements with company and principal shareholders. Generally, IPO involves one or more investment banks as "underwriters". The role of underwriters is very important. They are intermediaries between an issuer of a security and the investing public. There are many forms of underwriting. However, in Vietnam, firm commitment contract and bought deal are popularly used. In these contracts, the underwriters guarantee for all the shares of the organization. The underwriters will buy all the number of shares or the remaining shares after the issuing period. 2. Auction
In order to do the auction, the firm must determine the value of new securities, which is based on performance and potentiality assessment from sponsoring organizations, audit firms and consulting organizations to give the most suitable initial price. There are many methods to determine the initial price such as asset accumulation, market value… however DCF( discounted cash flow) and P/E (price earning) are usually used in Vietnam. Both two methods have advantages and disadvantages, so the issuers usually take the average result of two methods to get the highest benefit. After defining the stock price, the company publicizes business’s operation information before the auction session at least 20 days. Investors’ voting by person attendance forms can be received directly by the firm (if the auction held at the enterprise) or intermediary financial institutions (in case of auction in intermediary financial institutions) or the Securities Trading Center / municipal securities transactions and specified agents, voting by mail conforms the auction organizer regulations. The third step is carrying out the auction and determining the results. The...
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