Evaluating the Fund Raising through an IPO on ASX

Running head: EVALUATING THE FUND RAISING THROUGH AN IPO ON ASX
Evaluating the Fung Raising through an IPO
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EVALUATING THE FUND RAISING THROUGH AN IPO ON ASX
Executive summary
The aim of this report is to understand the process of capital raising by an Australian
companies through the issue of IPO and evaluate whether those fund has been utilized for the
purpose of the for which they have been raised. The report also discusses the objective of an
IPO, like conversion of private capital to the public and vice versa. The report also assessed
the performance of cyclical stock in the economy, i.e. how they can be useful in balancing the
performance of the portfolio in the period of recession and in the economic growth. At the
end of the report a concluding remarks has been added on the performance of the share price
issued through an IPO in a long and short run.

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EVALUATING THE FUND RAISING THROUGH AN IPO ON ASX
Table of Contents
Introduction................................................................................................................................3
Answer to part (A).....................................................................................................................3
Answer to part (B)......................................................................................................................6
Answer to part (C)......................................................................................................................8
Answer to part (D).....................................................................................................................9
Answer to part (E)....................................................................................................................11
Answer to part (F)....................................................................................................................14
Conclusion................................................................................................................................15
References................................................................................................................................16

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EVALUATING THE FUND RAISING THROUGH AN IPO ON ASX
Introduction
The purpose of this report is to understand the funding of the capital through an IPO
on the ASX. For this purpose, three public company has been taken like virtus health, GDI
property, carsales.com has been taken to evaluate their performance before and after the IPO.
It is also evaluated that whether the funds which has been raised to do the project, have been
utilized for the same purpose. Further it is also examined whether the IPO are costly way of
raising the long term finance for the corporation.
For this purpose the cost of equity has been calculated using CAPM approach and it
is compared with interest of long term debt, to evaluate the cost effectiveness. The report
further discusses the effect of the cyclical stock in managing the portfolio in the period of
recession and the economic boom. At the end of the report, different objectives of an IPO are
examined like conversion of private to public company and many others.
Answer to part (A)
Identification of Company Listed on the ASX with an IPO for an Amount of more than $ 100
Million.
Virtus Health
This company is related to the Health care sector, the business of the company is to
provide assisted reproductive services in Australia and Ireland, the corporation is expanding
is business presence in UK, Denmark and Singapore. The company has come up with an IPO
of 346.5 million USD in the year 2013 in the month of June. However the company can only
raise 310 million USD (Bewley, 2013).