Investment bankers say that the demand for your initial public offering looks strong, and they expect your stock to open with a bang. They want your inventory to open a "takeaway". "This prediction was proved to be correct-the stock opened at $23, and the price rose steadily throughout the trading day, and finally closed at ||. This prediction was proved to be correct-during the period of $23 and price, some trading days rose steadily and finally closed at $25. Although the strong performance of the stock on the first day is grafting, you can't shake the feeling that you may bid the wrong IPO price || Although the strong performance of the stock on the first day is pleasant, you can't shake the feeling that you may bid the wrong IPO price. Calculate in your mind: every increase in the issue price of 1 dollar will create an additional $2 million for the company. Calculate in your mind: every increase in the issue price of 1 dollar will create 2 million dollars for the company.
The idea bothers you-are you selling too cheaply || The idea keeps bothering you-are you selling too cheaply?
When the IPO quickly reached a significantly higher price on the first day of listing, people naturally wondered whether the investment bankers-and the executives of the issuing company-had not wrongly priced the transaction. Some quotes still posted impressive first-day gains || Despite the recent cooling of IPO market, some quotes still received impressive first-day mail. For example, in mid-June, 6 million shares of goto. com were listed at the price of 15, and closed at $22.375. In mid-June, 6 million shares of goto.com were planned to be listed at the price of 15, and closed at $22.375. After the transaction, it is regarded as $28.50. Not long ago. The initial public offerings of Internet and technology companies usually double on the first day || Not long ago, the initial public offerings of Internet and technology companies were on the first day. This instability makes it impossible to criticize afterwards.
MarketWatch.com products show the increasing demand for these problems || marketwatch.com provides an example of the incredible demand for these problems. The company, an online financial news agency, publicly issued shares on 1 month 15, 1999, and the company, an online financial news agency, 1 month 15. 1999, quoted at 17 USD. It closed at $97.50, an increase of || It closed at $97.50, an increase of 474%. In another example, theglobe.com rose by 606% from $9 to $63.50 on the first day of 1 1 month || In another example, theglobe.com rose by 606% from $9 to $63.50 on the first day of1month.
These huge price increases have raised the question of when the traditional valuation methods will still be effective. In any case, the investment bankers and chief financial officers who recently listed the company shrugged off the notice that the IPO pricing rules had changed || However, it is not surprising that the investment bankers and chief financial officers who recently listed the company's citizens argued that the IPO pricing rules have changed.
What's in the numbers || What's in the numbers?
Investment bankers said that the valuation process is both a science and an art. The scientific part of pricing equality is based on numbers: the issuer's history and expected financial results, and the value of comparable companies || The scientific part of pricing equality is based on numbers: the issuer's history and the planned financial results of comparable companies. Together with the evaluation, works of art are in the evaluation of investment bankers' market conditions and investors' demand for new issuance ||| Works of art are in the evaluation of investment bankers' market conditions and investors' demand for new issuance.
"Pricing IPO is always a function of valuation," said Cen Jialu || Setting IPO price is always a function of valuation, "said Charles J Kaplan, president of Equity Analytics || Kaplan said," This is what you must first determine || This is what you must first decide. "
Kaplan's company advises private holding companies that want to go public, and he points out a series of valuation multiples used to estimate the company's market value. Various evaluation multiples used to estimate the market price of a company. "Let's assume that a food distributor or food processing company wants to go public. Let's assume that a food distributor or a food processing company wants to sell shares publicly. We look at the income before interest and transfer and multiply it by ||| We look at the income before interest and dividend and multiply it by. If it is a relatively low-speed growth industry, the multiple will be lower; If it is a fast-growing company, we will use a higher multiple || If it is a relatively slow-growing industry, the multiple will be lower; If it is a fast-growing company, we will use a higher multiple. The multiple may not be greater than 10 or less than 2 or ||| The multiple may not be greater than 10 or less than 2 or 3.
The evaluation of the company's value began long before the IPO date || It is estimated that the evaluation of the company's value began long before the IPO date. Before choosing an investment bank, a listed business plan usually interviews some strict investment banks. Fear |||| A typical public offering business plan will meet with some investment banks before choosing a signature. In turn, investment bankers invest in the company to determine whether they want to handle the transaction || If they want to handle the transaction, they are taking turns to investigate the company's decision. They made a detailed review of the company's financial situation, the quality of the management team and the company's position in major markets || They made a detailed review of the company's financial situation. The quality of its management team and the company's position are in its main markets. Investment bankers also consider "comparable companies", that is, publicly traded companies in the same industry as IPO candidate companies || Investment bankers also consider publicly "comparable" with trading companies in industries such as IPO candidate companies.
When cooperating with mature companies in well-defined or mature industries, it is very simple to choose suitable comparable companies || When cooperating with certain companies or mature industries, it is very simple to choose suitable comparable companies. However, it is more challenging to find an acceptable benchmark for young companies, especially in new and rapidly changing industries || However, it is more challenging to find a suitable foundation for young companies, especially in new and rapidly changing industries. William J ||| William J. Ruehle, CFO of Broadcom in Irvine, California, a manufacturer of broadband communication integrated circuits listed in April 1998, stressed the need for flexibility in development comparison. "The world of comparable companies is constantly changing, so you are always faced with the challenge of finding the right company," he pointed out. "He pointed out," We started with a comparable communication semiconductor company, and then we expanded it to a company with unique France || We started with a comparable communication semiconductor company. Then we expanded the company with a unique license. The established company has one type of multiplicity || The established company has one type of multiplicity. As a new company, should we have a better multiple from the beginning, or should we lower the multiple because our records are shorter || As a new company, should we have a better multiple from the beginning, or should we lower the multiple because our records are shorter? "Although the IPO market is tepid, Ruehle said," I would say that the current pricing practice is definitely conducive to promising new companies to obtain a higher P/E ratio. "
But when there is no comparison, how do you evaluate a company-for example, an Internet-related enterprise that is starting a new activity || But when there is no comparison, how do you evaluate a company-for example, an enterprise that the Internet is promoting a new activity? To make matters worse, how do you evaluate a young enterprise with losses and rapid income growth || This is hard to confuse. How to evaluate young enterprises despite rapid income growth? This is a challenge, but Wall Street has experienced it before || This is a challenge, but Wall Street has overcome it before.
Kaplan pointed out: "In the past, a company had to show profits and reasonable income growth before it could conduct an IPO." || In the past, a company had to conduct an IPO with favorable profit and reasonable income growth. "Pay attention to Kaplan" and then the cable company Camelong, in the1970s and1980s || Then the cable company made progress. In the1970s and1980s, they needed an initial public offering, but their losses were getting bigger and bigger because they had very large capital expenditure to establish and maintain their network || They needed an initial public offering. But because they already have a very large capital expenditure to build and maintain their network, they are the loss of increasing achievements. Investment bankers realize that the income of these companies has increased substantially, and with the passage of time, the losses will be excluded because. These companies have a huge customer base, and they will buy services month by month || Because these companies have a huge customer base, they will buy services in 1 month. Investment bankers realize that companies are showing that the sharp increase and loss of income will be the time to vent. "
New model || New model
Solution: Change the valuation model || Solution: Change the valuation model. Kaplan said: "For example, instead of valuing cable TV companies in the traditional way, they value them based on the installed customer base." For example, instead of valuing the cable TV company in the traditional way, they value the company based on the installed customer base. Kaplan said, "This leads to multiple valuations based on cable company subscribers. "
Today's internet companies are forcing similar changes. Investment bankers focus on revenue growth, industry leadership and expected profit potential to establish benchmarks || Due to the loss of many achievements, investment bankers focus on revenue growth, industry leadership and plans to establish profit potential. "Early profitability is not the key to evaluating the value of such a company," said Jerry Kennedy, CPA and CFO of Inktomi Company in san mateo, California. Chief financial officer of San Jose Mateo, California. When evaluating stocks like ours, you must consider the market potential of the company and its revenue growth potential. If we don't make the right investment at this stage to get important benefits, it will be bad for our shareholders. Market share is only for early profit || If we don't make the right investment at this stage and gain important market share only for early profit, it will be a kind of harm to our shareholders. "
Inktomi was founded in February 1996, and built the software infrastructure for large Internet portals. The issue price of Inktomi IPO in June 10 and 1998 was USD 18 per share, and the stock doubled to USD 36 on the first day || INKTOMI IPO issue price1June 998 10 fixed price, namely/kloc-0 per share. Twice the depositor's first day's $36. Kennelly reports that there are some compromises between investment bankers on the basis and issue price || There are some concessions between kennel ly reports and investment bankers on the basis and issue price. "If you make a prediction, investment bankers will discount your words according to some factors that they think are acceptable || You will discount the words of startups and investment bankers according to some factors. You try to find the most authoritative market data you can find || You try to find the most authoritative market data you can find. "