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Managing Finance

Assessing the impact of initial public offerings (IPOs) on Australian companies' performance and evaluating the use of funds raised from IPOs for viable investment projects.

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Added on  2022-12-22

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This assessment evaluates the performance of Australian IPOs to understand the presence of underpricing in the capital market. It provides information about the IPO activity of selected companies, calculation for cost of equity, presence of underpricing, change in Australian IPO activity, performance of IPO with Australian index, and performance of IPO dividends vs Australian index.

Managing Finance

Assessing the impact of initial public offerings (IPOs) on Australian companies' performance and evaluating the use of funds raised from IPOs for viable investment projects.

   Added on 2022-12-22

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Running head: MANAGING FINANCE
Managing Finance
Name of the Student:
Name of the University:
Authors Note:
Managing Finance_1
MANAGING FINANCE
1
Table of Contents
Introduction:...............................................................................................................................2
a. Analysing the IPO activity of selected companies and depicting the funds that was used in
by the management:...................................................................................................................2
b. Identifying the calculation for cost of equity of the IPO’s by understating the minimum
returns needed by investors:.......................................................................................................4
c. Providing information about the presence of the under-pricing and how it changes from
industry to industry:...................................................................................................................5
d. Discussing about the change in Australian IPO activity from 2007 to 2017, while depicting
about the Australian economy:...................................................................................................6
e. Providing information about the performance of the IPO with Australian index:.................7
f. Providing information about the performance of the IPO dividends vs Australian index:....8
Conclusion:................................................................................................................................9
References and Bibliography:..................................................................................................10
Managing Finance_2
MANAGING FINANCE
2
Introduction:
The assessment evaluates the performance of Australian IPOs to understand the
presence of underpricing in the capital market. Furthermore, adequate information has been
provided in the assessment regarding the overall presence of underpricing by evaluating three
initial public offerings conducted in 2013. Moreover financial performance of the companies
is compared with the Australian index determine whether the investors were able to generate
higher returns from their investments during the IPO. In addition, the change in cost of equity
is also conducted to detect the change in cost of capital due to the issue of shares conducted
by the organization.
a. Analysing the IPO activity of selected companies and depicting the funds that was
used in by the management:
Company Name
Industr
y
Date
of
IPO
Amount
intended
to raise
Amount actually
raised The purpose of the funds
Hotel Property
Investments
Real
Estate
Jun-
13 279 $279m
Improve
capital management
flexibility, To be paid to the
Existing Unitholders,
Refinancing of existing
debt, Working capital and
Transaction costs
Pact Group Material
Jun-
13 648.8 $648.8m
Increasing the market for
liquid market for the shares,
improving capital structure
and financial flexibility,
improving the future on-
going access and improving
its working capital
requirements
Virtus Health
Healthc
are
Equipm
ent
Jun-
13 346.5 $346.5m
Funds to repay, in part,
existing debts of Virtus’
business and additional
financial flexibility to
pursue the growth
opportunities
Managing Finance_3
MANAGING FINANCE
3
Company Industry
Date
of
IPO
Amoun
t
Raised
Offer
price
Closing price on
first day of
trading
Return on
first day of
trading
Hotel
Property
Investments
Real
Estate
Dec-
13 $279m 2.1 1.94 -7.62%
Pact Group Material
Dec-
13
$648.8
m 3.8 3.34 -12.11%
Virtus Health
Healthcare
Equipment
Jun-
13
$346.5
m 5.68 6.28 10.56%
Hotel Property Investments:
The information provided in the above table directly indicates that the initial public
offering of Hotel property investments was conducted in June 2013. The organization
provided of a price of 2.1 while the price at the close the first day was at the levels of 1.94,
which indicated a loss in the share value of -7.62% (Asx.com.au, 2019). Moreover, the
company raised 279 million from the share issue, which intends to refinance its existing debt,
to support its working capital and use the proceeds as transaction cost. Furthermore, the
organization also aims to improve its Capital Management flexibility while paying the
existing unit holders of the organization.
Pact Group:
The initial public offering of Pact Group Was conducted in December 2013 where the
organization aimed to acquire 648.8 million from its share issue. Moreover, the offer price
initiated by the management was at the levels of 3.38, while the closing value for the first day
was 3.34, which is -12.11% is lower than the offer price (Asx.com.au, 2019). Furthermore,
the company initiated the initial public offering to support its capital structure flexibility and
improve the financial capitals that could be used in the long run. Additionally the
organization also aims to use the proceeds from the share issue as working capital
requirements and future development.
Virtus Health:
Managing Finance_4

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