Fin 501 Case 1 studymde
TUI UNIVERSITY
Module 1 Case Assignment
FIN 501
Dr. S. Wesley
February 20, 2014
Introduction For the purpose of this first module's case assignment students were assigned the task of reading various articles from the background in order to learn about the differences between traditional Initial Public Offerings and alternative online auctions such as the Dutch auction. After getting some insight about how the traditional IPO processes work verses using the alternative online process I will look at the company AVG and describe in detail which IPO process it would most benefit from. I will explain my reasons for this decision by focusing on the type of investors I believe they will likely attract as well as discuss the costs and the risks associated with each. I will also list various advantages of each IPO process and will then conclude by reaffirming my decision to advise AVG to go with the IPO process that I believe will best benefit their company.
Body
Based on the research I have conducted concerning the use of both the traditional and the online auction IPO processes and given AVG's global online audience and its untraditional business model I would highly recommend that the executives at AVG use a traditional IPO to bring their stock public and will list the reasons for my decision in the following paragraphs. Lets begin by taking a quick look at the differences of each IPO. Investment Bankers use a book building process and make their money by charging large fees and commissions to take the issue on a "Road Show" to large institutional and sophisticated investors to determine an appropriate IPO price and in return these selected investors often receive the initial allotments of IPO shares and therefore benefit from the price appreciation imbued between the offer price and the open price. (Fung, 2011). While, the Dutch auction is designed for the seller to get the best price. It enables more investors to participate in the
Module 1 Case Assignment
FIN 501
Dr. S. Wesley
February 20, 2014
Introduction For the purpose of this first module's case assignment students were assigned the task of reading various articles from the background in order to learn about the differences between traditional Initial Public Offerings and alternative online auctions such as the Dutch auction. After getting some insight about how the traditional IPO processes work verses using the alternative online process I will look at the company AVG and describe in detail which IPO process it would most benefit from. I will explain my reasons for this decision by focusing on the type of investors I believe they will likely attract as well as discuss the costs and the risks associated with each. I will also list various advantages of each IPO process and will then conclude by reaffirming my decision to advise AVG to go with the IPO process that I believe will best benefit their company.
Body
Based on the research I have conducted concerning the use of both the traditional and the online auction IPO processes and given AVG's global online audience and its untraditional business model I would highly recommend that the executives at AVG use a traditional IPO to bring their stock public and will list the reasons for my decision in the following paragraphs. Lets begin by taking a quick look at the differences of each IPO. Investment Bankers use a book building process and make their money by charging large fees and commissions to take the issue on a "Road Show" to large institutional and sophisticated investors to determine an appropriate IPO price and in return these selected investors often receive the initial allotments of IPO shares and therefore benefit from the price appreciation imbued between the offer price and the open price. (Fung, 2011). While, the Dutch auction is designed for the seller to get the best price. It enables more investors to participate in the