Literature Review | Managing Finance

Running head: MANAGING FINANCE
Managing Finance
Name of the Student:
Name of the University:
Author’s Note:

MANAGING FINANCE1
Executive Summary
The aim of the assignment is to conduct a financial analysis on the historical performances of the
IPO in the Australian IPO Market. The selected IPO would be analyzed based on the prospectus
of the firm and the relevant changes in the share price of the company after the issue of the IPO
in the Australian Exchange Stock. The IPO that was selected for the purpose of analysis is the
Carsales.com whereby the value of the IPO was around $163.6 million. The IPO issued by the
Carsales.com was said to be one of the biggest IPO in the Australian Stock Market that made a
strong debut in the Australian Stock Exchange. The share price analysis for the company was
done for a period of 2009-2014 in the aspect of analyzing the movement of the share price of the
company and assessing whether the same has created value or not for the shareholders of the
company.

MANAGING FINANCE2
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Prospectus of Company...............................................................................................................3
Costs Associated with the IPO....................................................................................................4
IPOs are a Costly way of raising long term Finance for Corporations........................................4
Underpricing of IPO’s.................................................................................................................5
IPO Performance.........................................................................................................................7
Share Price Analysis....................................................................................................................7
Dividend Information..................................................................................................................8
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

MANAGING FINANCE3
Introduction
The financial analysis of the Carsales.com Company is done by analyzing the Initial
Public Offering with which it raised $164.1 million of capital flow that was carried on in the year
2009. On 10th September 2009, the internet trading firm Carsales.com Ltd Company shares got
listed where the share price opened at $3.92 which opened at 12% premium price than the issue
price of the share which was $3.50. The high rise in the share price of the company gave the
company a whooping market cap of $850mn. In terms of operations the company covers the
automotive, motorcycle, marine and displays advertisements and operates around 27 websites in
the automotive sector. The money raised by companies from the IPO’s are generally used by
firms for the purpose of investing into operating or investing activities of the firm or are
generally used for any other corporate purpose (Carsales.com to debut on bourse, 2009). IPO’s
are also used by the company as an addition to equity share capital by the company which is then
used as a long-term perspective loan by the company. The dividend policy trend followed by the
company after the issuance of IPO was also analyzed as a measure of profits paid from the total
earnings per share of the company.
Discussion
Prospectus of Company
The Initial Public Offering brought by the Carsales.com Company is for the 42.9-71.1
million shares, comprising of 0.4 million New Shares and 42.5 million – 70.7 million shares
would be the existing shares of the company. The key purpose of the offer is to allow the
existing shareholders of the company realize a portion of their investment done in the company.