Corporate Finance Assessment 2022

Running head: CORPORATE FINANCE
Corporate Finance
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Introduction:...............................................................................................................................2
Discussing the main reason behind the undertaking of the IPO:...............................................2
Critically evaluating the statement that IPOs are a costly way of raising long term finance for
corporations:...............................................................................................................................4
Level of IPO activity in Australia compared with Market conditions:......................................6
Analysing the performance of IPOs over the period of three years:..........................................8
Analysing the Dividend policy of the organisation over the period of three years:..................9
Conclusion:..............................................................................................................................10
References:...............................................................................................................................11

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Introduction:
The assessment evaluates the relevant level of IPOs that has been launched during
2013, where all the relevant information regarding the requirements of the funds is mainly
evaluated from the prospectus of the IPO. The IPO is mainly conducted by companies to
gather the required level of funding for their operations. In addition, the analysis has been
conducted on the overall change in cost of equity that occurs after the completion of the IPOS
by the company. In the similar process, the overall analysis has been conducted for
addressing the level of under-pricing there his currently being present in the IPOs during their
initiations. The implications of the under-pricing in IPOs have been conducted, where it is
considered to be one the major problems for the companies, which minimise their capability
to gather the required level of funding from investment. increase the acquisition of over the
period of time.
Discussing the main reason behind the undertaking of the IPO:
Company
Name Industry
Date
of
IPO
Amount
intended
to raise
Amount
actually
raised The purpose of the funds
Ozforex
Diversifie
d financial
Oct-
13 $439.4m $480.0m
The main purpose of the fund is to give
opportunity to current shareholders to
release their profits, reduce debt, increase
working capital and attract and retain
quality staff
Nine
Entertain
ment
Corporati
on Media
Dec-
13 $643.3m $697.3m
The main purpose of the offer is liquid
market for its Shares, funds to repay, in
part, NEC’s existing debts and pay the
Offer costs, repayment of debt drawn,
payment to SaleCo, payment of the costs
associated with the Offer, and increase in
cash and cash equivalents;
GDI
Property real Estate
Dec-
13 $567.7m $567.7m
Providing seed investors with the
opportunity in Rollover offer and stapled
securities. The fund is acquired for
working capital, and reduce debt

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The initial public offering information has been highlights in the above table about the
three IPOs that was conducted during 2013, which was completed during same year. The
analysis of the table has indicated about the overall purpose of the IPO, which is the main
reason behind the company initiating the relevant IPO. The overall process is mainly initiated
when the organisation requires relevant funding for its operations and is able to acquire the
required funding for its operations. One of the major reasons behind the IPO initiation for the
reduction in debt capital that is intended by the management, as higher debt capital will
increase interest payments and erode the income that can be generated from operations. The
IPO is also initiated when the company intends to increase the level of cash, working capital
and funds that would be utilised for fuelling their expansion (Asx.com.au, 2019). In addition,
the analysis also indicated that only GDI property has acquired the anticipated funding from
their IPO. On the other hand, the other two companies were not able to attain anticipated
funding from the IPO, which was due to the low level of pricing for their share price.
The prospectus of Ozforex, Nine Entertainment Corporation and GDI Property has
mainly stated about the level of debt reduction that would be conducted by the companies
after acquiring the required level of funding’s. The prospectus also revealed that all the three
companies wanted to increase their exposure in capital market and which is the main reason
behind the IPO that was initiated by them during the year of 2013. The initial pricing of
Ozforex was at $2, Nine Entertainment Corporation was at $2 .35 and GDI Property was at
$1. However, from the analysis of the first day trade it has been detected that the overall
share price value of Nine Entertainment Corporation and GDI Property mainly declined to
new levels from their initial price offering (Asx.com.au, 2019).
Ozforex 2014
Growth(retention) 14.0%

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Closing price 0.89
Dividend 0.035
Cost of capital 17.9%
Nine Entertainment Corporation 2014
Growth(retention) 13.0%
Closing price 1.97
Dividend 0.04
Cost of capital 15.13%
GDI Property 2014
Growth(retention) 16.0%
Closing price 2.88
Dividend 0.035
Cost of capital 17.2%
Information about the cost of equity has been depicted in thee above table, where in-
depth information about the cost of equity for Ozforex, Nine Entertainment Corporation and
GDI Property after the completion of the IPO. All the three companies before the IPO has not
cost of equity, as the calculation indicated that cost of equity only incurs when the company
issues shares in the capital market. However, the cost of equity has been calculated by not
using the capital asset pricing model, beta of the stock will be not determined in such short
instance. Therefore, it has been detected that the cost of capital for Ozforex is at 17.9%, Nine
Entertainment Corporation is at 15.13% and GDI Property is at 17.2%. The high level of cost
of equity is mainly due to the inclusion of high growth rate that has been kept for utilising the
share price. Bhaskar, Nian & Chuen (2015) mentioned that investor utilises different levels of
investment calculations to determine the share price valuation conditions of the stock, while
making relevant investment decisions.

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Critically evaluating the statement that IPOs are a costly way of raising long term
finance for corporations:
Company Ozforex
Nine Entertainment
Corporation
GDI
Property
Industry Diversified financial Media real Estate
Date of IPO 10/1/2013 12/1/2013 12/1/2013
Amount Raised $439.4m $643.3m $567.7m
Offer price $480.0m $697.3m $567.7m
Offer price 2 2.35 1
Closing price on first day of trading 2.56 1.98 0.89
Return on first day of trading 28.00% -15.74% -11.00%
The above table provides all the relevant information about the three IPOs and the
return that has been generated during the first day of trading. The analysis has been
conducted for determining the relevant presence of under-pricing that has been conducted in
the above three IPOs. The analysis has directly indicated that nl the share price of Ozforex
increased by 28.00% on the first day of trade, while the other two companies’ shares declined
to -15.74% for Nine Entertainment Corporation and -11.00% for GDI Property. Thus, it has
been detected that the overall share price of Ozforex only increased from $2.00 to $2.56 in
first day of trade due to the relevant levels of under-pricing. This change in the share price
value is due to the presence of under-pricing that currently haunts the capital market of major
countries (Asx.com.au, 2019).
One of the researches conducted in America has mainly indicated that 80% of the IPO
face under-pricing, which is considered as one of the essential parts of the public offering.
The study states that regardless of the sector or industry the under-pricing relevant occur to
attract more investors into the vicinity of the underwriter during the IPO. Thus, the main aim
of the organisation is to complete the IPO process and distribution of the share price with
appropriate pricing to accommodate the relevant level of capital for investment. In the similar
research, it has been detected that in Australia almost one-third of companies face under-

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pricing, which is conducted during the IPOs. Thus, maximum of the IPOs conducted in
Australia is faced with under-pricing , which can be proved by utilising the under-pricing that
has been conducted in the above three IPOs (Asx.com.au, 2019).
Level of IPO activity in Australia compared with Market conditions:
Year
Number of
IPO ALL Ordinary Index
2007 260 6417
2008 75 3659
2009 42 4883
2010 99 4847
2011 105 4111
2012 51 4665
2013 61 5353
2014 73 5389
2015 97 5345
2016 94 5719
2017 115 6167
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-100%
-50%
0%
50%
100%
150%
Activity of IPO
The information about the IPO activity that has been conducted in the above table and
graph, which highlighted the overall activities that have been conducted in the Australian
economy. The data has been collected from Deloitte website where relevant information from

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10 years have been collected from the IPOs in Australia. The relevant comparison of the IPO
activity with the capital market conditions of Australia has been conducted for detecting the
mindset of the companies who initiate the IPO process. The analysis of the figure has mainly
stated that during 2009 the overall increment in the activity of IPO was witnessed. This high
increment in the overall IPO activity supports and improvements in the return generation
capability of ALL Ordinary Index. Thus, it has been detected that the growth of the
Australian market is directly linked with the number of IPOs that is conducted during the
fiscal year. Hence, from the relevant evaluation, it has been detected that performance of both
IPOs and capital market of Australia is mainly similar, where higher improvement in the
capital market results in the increment in IPOs that is been conducted during the year (Kiem
et al., 2016).
During 2007 the number of IPOs escalated immensely that has not been touched
since, as the overall market conditions was at the top level, after which recession in the US
started and hampered the capital market progress of the entire world. Therefore, it is detected
that companies mainly initiate the IPO during a successful capital market period, as it allows
them to complete the process and gather the required level of funding for the future
operations. This is the main reason behind the high level of IPOs that is been conducted when
the market is in an uptrend, while certain decline in conducted when eth market is not
performing appropriately.

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Analysing the performance of IPOs over the period of three years:
11/1/2013
1/1/2014
3/1/2014
5/1/2014
7/1/2014
9/1/2014
11/1/2014
1/1/2015
3/1/2015
5/1/2015
7/1/2015
9/1/2015
11/1/2015
1/1/2016
3/1/2016
5/1/2016
7/1/2016
9/1/2016
11/1/2016
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
Return without dividends
Ozforex Nine Entertainment Corporation
GDI Property
All Ordinary
Index
Ozfore
x
Nine Entertainment
Corporation
GDI
Property
Return without
dividends 0.26% -0.57% -1.58% 0.40%
The information about the return generation capability of Ozforex, Nine
Entertainment Corporation and GDI Property has been depicted in the above table over the
period of three years. The returns of the three companies are mainly compared with the ALL
Ordinary Index, which detects the overall return generation condition of the IPO after the
share price issue until three years. Therefore, it has been detected that the overall
performance of Ozforex and Nine Entertainment Corporation is mainly negative after the
share issue in 2013. The price of the stock has mainly fallen and provided negative returns to
the investors over the period of time. The value of Ozforex share has mainly decline from
$2.6 in first data of trade to 1.65 in 2016, while in the similar process the overall value of
Nine Entertainment Corporation has declined from 1.97 to 0.925 in 2016. However, the
analysis has mainly indicated that the share price value of only GDI Property has increased
by only 0.40% during the first three year of its IPO. The value has mainly inclined from 0.89

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in the first date of trade to 1 in 2016. This increment in the value indicates the benefits that
would be generated by the investors over the period of time (Finance.yahoo.com, 2019).
Analysing the Dividend policy of the organisation over the period of three years:
11/1/2013
1/1/2014
3/1/2014
5/1/2014
7/1/2014
9/1/2014
11/1/2014
1/1/2015
3/1/2015
5/1/2015
7/1/2015
9/1/2015
11/1/2015
1/1/2016
3/1/2016
5/1/2016
7/1/2016
9/1/2016
11/1/2016
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
Return with dividends
Ozforex Nine Entertainment Corporation
GDI Property
All Ordinary
Index
Ozfor
ex
Nine Entertainment
Corporation
GDI
Property
Return with
dividends 0.26%
-
0.42% -1.11% 1.00%
The above table and graph represents the information regarding the returns generated
by the three companies after adding the relevant dividends. The analysis has mainly indicated
that the overall improvements in the return generation capability of the three IPO after
inclusion of the dividends paid after the three years of the IPO. The analysis has mainly
indicated that after the inclusion of the dividend it has been detected that both Ozforex and
GDI Property is providing positive incomes (Finance.yahoo.com, 2019). The inclusion of
dividends directly provides higher scope to the investors, where they are able to generate high
level of income from investment. However, the dividends of Nine Entertainment Corporation
reduce the losses that would have been incurred by the investors having invested over the
period of three years.

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Conclusion:
The overall assessment has been conducted to detecting the significance of IPOs and
the measure that is taken by the companies before initial the Public offerings. In addition, the
IPO of Ozforex, Nine Entertainment Corporation and GDI Property is mainly conducted for
detecting the under-pricing mechanism that is currently present in Australia and is haunting
different IPOs. The returns that has been generated by the three IPOs has been analysed,
where it is detected that the inclusion of the dividends allow the investors to detect the actual
return that has been generated by a stock over the period of time.

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References:
Asx.com.au. (2019). Asx.com.au. Retrieved 3 August 2019, from
https://www.asx.com.au/asx/share-price-research/company/NEC
Asx.com.au. (2019). Asx.com.au. Retrieved 3 August 2019, from
https://www.asx.com.au/asx/share-price-research/company/GDI
Asx.com.au. (2019). Asx.com.au. Retrieved 3 August 2019, from
https://www.asx.com.au/asxpdf/20131216/pdf/42lms8yk2x27wk.pdf
Asx.com.au. (2019). Asx.com.au. Retrieved 3 August 2019, from
https://www.asx.com.au/asxpdf/20131010/pdf/42jykmt5rf9tpb.pdf
Bhaskar, N. D., Nian, L. P., & Chuen, D. L. K. (2015). Bitcoin IPO, ETF, and Crowdfunding.
In Handbook of Digital Currency(pp. 529-557). Academic Press.
Finance.yahoo.com. (2019). Finance.yahoo.com. Retrieved 3 August 2019, from
https://finance.yahoo.com/
Kiem, A. S., Johnson, F., Westra, S., van Dijk, A., Evans, J. P., O’Donnell, A., ... & Jakob,
D. (2016). Natural hazards in Australia: droughts. Climatic Change, 139(1), 37-54.