Managing Finance

This assignment discusses the financial performance of three companies listed in the Australian Stock Exchange and the implications of their initial public offerings. It analyzes the advantages and disadvantages of overpricing and underpricing strategies. The companies examined are Pact Group, Virtus Health, and Meridien Energy.

Running head: MANAGING FINANCE
Managing Finance
Name of the student:
Name of the university:
Author Note:

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Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................3
Answer of Question (a)..........................................................................................................3
Answer of Question (b)..........................................................................................................3
Answer to Question (c)..........................................................................................................4
Answer to Question (d)..........................................................................................................5
Answer to Question (e)..........................................................................................................6
Answer to Question (f)...........................................................................................................8
Conclusion..................................................................................................................................9

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Introduction:
The aim of the assignment deals with the three chosen companies listed in the
Australian Stock Exchange which are the Pact Group, Virtus Health and Meridien Energy.
The financial performance of all the three stated companies has been estimated along with the
result in the share price of the commerce through initial public offering. The regular deviation
in the share price of all selected three companies has been disclosed in the conducted study.
The advantages and disadvantages in the strategy of overpricing and under pricing of the
company have been depicted in the conducted research.

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Discussion:
Answer of Question (a)
Detailed analysis of Pact Group, Virtus Health and Meridien Energy has been
conducted in the study in order to find out the first day of trading. There are certain
advantages of the company through the process of issuing the initial public offering in order
to raise capital. This will further help the company in order to reach large number of
shareholders in the market. This further helps the business of the company in need to further
enlarge the current business by effectively utilizing the total amount elevated by the business.
From the above evaluation it can be said that in case of Pact group on the first day of
trading, the company incurred a loss of about 4%. But in case of the Virtus Health and
Meridian Energy, both the company has incurred profit of about 10% and 6% during the
implication of the IPO of the three stocks (Matthew 2017). Out of the three chosen
companies, Virtus Health and Meridian energy is showing the positive return on the first day
of trading where Virtus health was at top notch about 10%. It also signifies that the healthcare
equipment is ahead among the other two materials and utilizes industry in the first day of
trading.
Answer of Question (b)
In order to increase funds, initial public offering is a very costly way to raise the long
term finance for corporation. The company tries to make offer of securities to the public by
adopting the strategy of the initial public offering. There are certain norms which are related
to the Australian Stock Exchange in order to prepare the information’s based on

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memorandum. The process of raising capital through initial public offering is an advantage
for the management of the company which is further based on certain policies.
There are certain cost which is associated in order to list the stocks in the IPO and for
the management of the company needs to undertake certain plan to accomplish its goal in the
long run. The policies must be revised in order to forecast the certain risk which is associated
with enlisting the stocks in the market as IPO. The under pricing strategy is effective as it
increases the chance of the company in order expand the business growth. Hence the decision
made by the manager and higher authorities in case of the investment in the market are rather
taken into consideration by the company.
Answer to Question (c)
The Pact Group is a material related industry where the return percentage on the first
day of trading on the Australian Stock Exchange is estimated accordingly. In this particular
company, the strategy which is adopted by the management is to set the IPO in such a way
which is currently overpriced (McKinney 2015). The company further thinks that the
business will further accomplish potential expansion in the future that’s why the offer price of
Pact Group is presently overpriced. This is reason behind the negative come back out of the
first day of trading as Pact Group is currently one of the rising companies in the material
industry (Libby 2017).
The Virtus Health deals with the healthcare equipment’s and as per the current
presentation of the business, it can be interpreted that Virtus health goes for the under pricing
in the initial public offering with the strategy to draw the potential investors in the market in
order to purchase the shares of Virtus Health (Burtonshaw-Gunn 2017). The business issues
the share price at a discount so that the potential investors are benefited from such kind of
investments. The degree of under pricing of the company varies from business to business.

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Initially under pricing the initial public offering generally increases the stock value of the
company in that case. As the present financial situation of the company is excellent this
further makes the management system of the business quite confident to issue the initial
public offers at a discount (Bowman 2016).
On the other hand, Meridien Energy deals with the utilities and as per the existing
financial presentation of the business, the company also went for under pricing at an early
stage in order to draw attention of the possible investors in the market. Further this would
help the business in order to lift more capital from the market. Effective utilization of capital
will repeatedly increase the overall worth of the company. The existing financing status is
satisfactory and implementing the strategy of under pricing will repeatedly enhance the in
general financial position of the company (Finkler, Smith and Calabrese 2018).
Answer to Question (d)
The activity related to initial public offering in an economy is cyclical and is further
considered as a purpose of the market condition. The recurring stocks are those stocks which
move constantly fluctuates depending on the current market situation of the business. These
are the IPO stocks which are traded a lot in the market because the potential investors in this
case attempt to perform transaction of shares in the market (Barr and McClellan 2018).
Such major fluctuations in the price of shares listed in the IPO stocks over the last
seven to eight years which means that the under pricing scheme of the business is generally
rising in that case. The majority firms in case of initial public offering tends to accept the
under pricing strategic policy (Härdle, Chen and Overbeck 2017). This is the technique which
is followed by the most of the firms whose present financial situation is good and further to
enlarge the current circumstances of the business, the firm further needs to accept the
potential policy of under pricing.

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Such decision take by the uppers level management is basically based on the overall
objectives and the current situation of the industry. In such a situation if the amount of the
IPO which represent the dangerous stocks increases then there should be improved average
under pricing. There is definite risk linked with the assessment of the business along with the
under pricing of the shares in the market. There are negligible changes in the disparity of the
under pricing and eventually if there are fixed risk return relation in such scenario (Kaplan
and Atkinson 2015).
Answer to Question (e)
There contains various reasons for the business to initiate IPOs for various reasons
such as converting a private business to a public business, rotating off a company into an
existing listed business or privatization of a public business. Regardless of these dissimilar
objectives, the fundamental inspiration would be to boost investor worth. Since the existing
economic circumstances of Australia, the share price of the business will gradually boost and
further the possible investors in this case will be extremely aggravated in order to invest in
the market (Gitman, Juchau and Flanagan 2015). Low price of shares listed in IPO will
definitely draw the possible investors in the market which will routinely boost the worth of
the shares in the market.
After performing the evaluation of the three companies which are the Pact Group,
Virtus Health and the Meridien Energy based on the share price of the last five years (Shoup
2017). In case of the Pact Group the strategy related to overpricing at first phrase didn’t
worked out but after that from the year 2014 there is a constant rise in the share price of the

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company. This is the reason behind the gradual improvements made in the internal
management system of the business. The share went at peak in the financial year 2016 which
indicates the current financial performance of the business (Cucchiella and Rosa 2015).
The share price of Virtus health also decreased steadily which means that the
speculation made by the business is not effective and in such case the business needs to put
effort on the current strategies in order to advance the value of the shares of the business
(Ehrhardt and Brigham 2016). Positive changes in the management system and further
effective investment strategies will increase the value of the shares in the market. Here in this
case the under pricing strategy of the company didn’t worked out according to the plan as the
company faced various difficulties like the fall in the share price of the company. This
situation further demotivated the investors in the market to opt for buying the shares of this
company. Due to all the mentioned circumstances it happened for the company in a
decreasing value of shares in the security market. In order to improve the current business
situation, the higher authorities in that case needs to take certain measures to bring changes in
the system.
In case of Meridien Energy, the share price of the business is continuously increasing
after declaration of stocks in the IPO of the company (Fracassi 2016). This means that the
existing performance of the company is good and further as per thorough examination it is
found that the financial performance of Meridien Energy is steadily improving. Gradual boost
in the share worth of the company will mechanically draw attention of the potential investors
in the business. This will further lead to an increase in the share price of the business in such
circumstances (Smith 2017).

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Answer to Question (f)
Dividend yield of the company is distributed among the investors as it benefits them
to earn extra income from the share market. The shareholders in the Pact Group will also able
to earn more due to the reason that share price of the company are increasing gradually
(Grennan and Michaely 2018). The company potential of dragging return out of the
investment is pretty higher. This will further benefit the investors of the company to get huge
return on dividend yield.
Consequently in case of Meridien Energy, the potential investors will be able to earn a
lot through investing as the dividend yield of the company will be high as the current
financial performance of the company is satisfactory. This will automatically help the
business to draw the potential investors in the market which will further help the company to
raise capital for further investments. The business of the company in such a scenario will
grow drastically as the potential investment is made by the strategic business management of
the company (Robinson et al. 2015).

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Conclusion
From the above discussion it can be concluded that there are certain benefits of listing
the stocks at IPO of the company along with certain disadvantages. It is the responsibility of
the management of the business to take positive initiatives in order to boost the possible
business of the company. Since the conducted analysis it is found that the financial
performance of Pact group and Meridien Energy is performing beyond its desired level. The
business performance of Virtus Health is below average as per the analysis conducted in the
above discussion. In such a situation, the management system of the business in that case
wants to implement certain events to advance the current business position. The result of
under pricing and the overpricing of stocks listed as IPO in the market and further the
management strategy have been duly represented in the above research study.

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