Finance Exam: IPO, Acquisition, and Hostile Takeover Strategies

FINANCE EXAM

TABLE OF CONTENTS
QUESTION 1..................................................................................................................................3
a)..................................................................................................................................................3
b)..................................................................................................................................................3
c)..................................................................................................................................................4
d)..................................................................................................................................................4
e)..................................................................................................................................................5
QUESTION 2..................................................................................................................................5
a)..................................................................................................................................................5
(b).................................................................................................................................................6
(c).................................................................................................................................................6
(d).................................................................................................................................................7
e)..................................................................................................................................................7
REFERENCES................................................................................................................................9
APPENDIX....................................................................................................................................11
QUESTION 1................................................................................................................................11
QUESTION 2................................................................................................................................12
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QUESTION 1
a)
Public offering is concerned with offering shares or debt securities to the public for the
first time in ha attempt to raise capital. On the basis of this, it can be identified that it is issued in
both unseasonable & seasonal manners. The unseasoned initial public offering is done by private
group of mangers a between the marker. In this type of offering attention is paid on connecting
with shareholders for raising fund in unfrequented time when awareness providing is given much
emphasis (Bask and Nätter, 2021). The one of the significant benefit that can be derived through
this type of offering is greater public awareness, obtaining the publicity and credibility, etc. On
the other side, has few limitations as well which are diverting company's executive attention
away from their core business.
Seasonal initial public offering is associated with the existing company that is public-ally
traded and have decided to raise additional capital by selling shares of its stocks. In this type of
offerings company receives number of advantages and disadvantages (Souitaris and et.al., 2020).
The benefits comprise increasing the number of shares, increased fund capacity, increased ability
to declined debt. In against to this, changing company capital structure, decreasing of earning per
share, higher requirement of financial reporting, etc which affect smooth processing of company.
b)
Under pricing is practice of listing an initial public offering that the price below then its
real value in the stock market. It is considered to be under-priced when a new stock closes its
first day of the trading above the set IPO price. In the initial public offering under-priced is
considered to be common due to the market nature.
According to Prasad (2018) there are number of reasons for which under-priced occur
while initial public offering as investors and employees who have stock options can benefit from
firm. The investors who exercise options before firm going for the initial offering. In addition to
this, pay tax on spread between the exercise price and fair market value. In against to this,
Hussein, Zhou and Deng (2020) depicted that there is negative value of under-price occur due to
the intrinsic value and pricing error. The main reason that can be articulated that there are under
estimated demand in the market for this company stock.
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