Ipo and a Case in Vietnam

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Initial Public Offering (IPO) is an alternative for company to obtain long term financial resources. The IPO funds are usually used to pay liabilities in order to improve its performance or to expanse the business. By going public, company automatically improves its performance because previous owners and public society own it. One of the indicators to measure the company performance is using financial ratio. The financial ratios include liquidity ratio, leverage ratio, and profitability ratio. The objective of this study is to find out whether an IPO creates or destroys the value of a company via building an analytical framework and apply it in one case study – FPT Corporation. The hypothesis of this research is that there is significant financial performance increase or decrease on each ratio after IPO. The method is comparing the pre- and post- IPOs’ financial ratios in order to examine how an IPO affects the firm’s performance. The result of this research shows that IPO has significant influence on the increase of current ratio, quick ratio, and net profit margin ratio. On the contrary, IPO has impact on the decrease of debt to equity ratio.

1.1. Initial public offering
An initial public offering (IPO), referred to simply as an "offering" or "flotation", is when a company (called the issuer) issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded. In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market. An IPO can be a risky investment. For the individual investor it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value. 1.2. Reason for listing

When a company lists its shares on a public exchange, it will almost invariably look to issue additional new shares in order at the same time. The money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of stock market investors to provide it with large volumes of capital for future growth. The company is never required to repay the capital, but instead the new shareholders have a right to future profits distributed by the company and the right to a capital distribution in case of a dissolution. The existing shareholders will see their shareholdings diluted as a proportion of the company's shares. However, they hope that the capital investment will make their shareholdings more valuable in absolute terms. In addition, once a company is listed, it will be able to issue further shares via a rights issue, thereby again providing itself with capital for expansion without incurring any debt. This regular ability to raise large amounts of capital from the general market, rather than having to seek and negotiate with individual investors, is a key incentive for many companies seeking to list. 1.3. Procedure

IPOs generally involve one or more investment banks known as "underwriters". The company offering its shares, called the "issuer", enters a contract with a lead underwriter to sell its shares to the public. The underwriter then approaches investors with offers to sell these shares. The sale (allocation and pricing) of shares in an IPO may take several forms. Common methods include: • Best efforts contract

• Firm commitment contract
• All-or-none contract...
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