FINA6000: Case Study: IPO Analysis of Calima Energy and Amcor PLC

This case study analyzes the Initial Public Offerings (IPOs) of two ASX-listed companies, Calima Energy Limited and Amcor PLC, focusing on their share price performance and financial strategies. The analysis includes an evaluation of underpricing strategies, comparing the offer and closing prices on the first day of trading for both companies. The study further examines the share price movements over an eight-year period (2007-2014) to assess the long-term financial performance and dividend policies of each company. The assignment explores the impact of IPOs on firm performance, considering factors such as market trading, shareholder attraction, and the overall economic situation, with a focus on the implications of these strategies for long-term business sustainability and shareholder value. The conclusion highlights that issuing an IPO is significant for the business to sustain in the long run as per the going concern concept of the company.

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Table of Contents
Introduction................................................................................................................................2
In Response to Question 1..........................................................................................................2
In Response to Question 2..........................................................................................................4
In Response to Question 3..........................................................................................................5
In Response to Question 4..........................................................................................................5
In Response to Question 5..........................................................................................................6
Conclusion..................................................................................................................................7
Reference....................................................................................................................................8

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Introduction
The assignment actually deals with the concept of Initial Public Offering based on the
two ASX listed companies which are the Amcor PLC and Calima energy limited. The chosen
company which is the Calima energy limited is an ASX listed based from Australia. The
significant business activity of the company is making investment in the projects related to
the oil and gas production and exploration which takes place internationally. Recently the
company is expanding its business into farm agreement in respect to the oil and gas licenses.
On the other hand, Amcor plc. is a Australian based global packaging company which
actually produces the flexible packaging, cartons and other services which are the beverages,
foods, persona care and other products. The company is further listed in the ASX and the
company is expanding its business in the long run activity. Amcor is the largest manufacturer
of the PET also known as the Polyethylene terephthalate global containers.
In Response to Question 1
The IPO of the two chosen company which are the Calima energy limited and Amcor
plc limited have been evaluated based on the share information obtained. For both the
company the eight years share price have been obtained for the purpose of comparison. The
shares of the IPO are traded in the open market which further helps the company to expand
the business based on long term objectives of the firm. The company actually traded in the
open market in order to attract the shareholders for the purpose of business development. The
business of company will definitely prosper if the shares of the company are traded in the
market an both the shares of the company is listed in the ASX.

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The
above charts
and table
represents the share price movement of Calima energy limited and Amcor plc limited. Both
the company in this case applied the strategy of underpricing regarding the issue of IPO but
the resultant output of the company is different. The analysis is done based on the last eight
years of evaluation starting from the financial year 2007 and ending in the year 2014 (Härdle,
Chen and Overbeck 2017). The underpricing of the IPO in case of the both the company is
applied where as per the chart of Calima and Amcor, it is quite clear that the financial
performance of Amcor is far better than the Calima energy limited. The IPO of both the
company in the first day of trading provided positive return for the business.

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The underpricing strategy of the IPO is far better than the strategy of overpricing due
to the fact that the positive return in the first day of trading plays a crucial role for the
company. Maximize return for the shareholders of the company from the first day of trading
is always an advantage as it will generate the interest of the shareholders in a drastic manner.
In case of the Calima energy limited, from the chart it can be interpreted that starting from the
financial year 2009 to 2011, the share price of the company has increased drastically due to
the fact that financial performance of the company was at its peak. This is the reason behind
such increase in the share price of the company and the potential investors in this case will
definitely try to take advantage of such significant rise in the share price of the firm.
The share price of Amcor plc as shown in the above chart is continuously rising in an
increasing manner. The reason behind that the share price of IPO in the first day of trading in
the market actually provided huge return as compared to that of the Calima energy limited.
On the other hand the company has been successful in making effective investment which
further means that out of such investment the company has generated huge return. This
further motivated the shareholders of the company to make further investment. The share
price of Amcor starting from the year 2009 to 2014 it has continuously increased due to the
fact that the share price of the company has increased.
In Response to Question 2
The initial public offering of shares referred to the shares which are publicly or
privately listed by the company. After issuing the IPO, the shares of the company are traded
in the market. The cost of raising IPO is quite huge which the company needs to bear in order
to enhance the long term finance of the business. When the company is going through its
rough time or rather suffering from the financial crisis, then at that time the company will be
safe by issuing shares in the market in the term of IPO. Most of the company rather follows

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the going concern concept of business and for that it is significant for the company to adopt
the strategy of issuing new shares in the market. When a company is large based on the
revenue generation, production and employee strength then the company is able to issue new
shares in the market.
In Response to Question 3
The comparison in the first of trading in the market is based on the two companies
which are the Calima Energy Limited and Amcor plc limited from two different sectors
which are the energy and materials respectively. The comparison of the offer and closing
price in the first day of trading is done respectively which has provided positive return in the
business. The more return in case of the Amcor plc limited which is 7%. The return of the
company is generated on the first day of trading in the market (De Grauwe and Grimaldi
2018). The effectiveness of underpricing of the shares actually can be visible in the case of
the company named Amcor plc. The reason behind that is the financial performance of the
company is better than the other compared company which is Calima energy limited. The
underpricing of the shares plays significant role for attracting potential shareholders in the
market in order to enhance overall business performance of the company.
In Response to Question 4
In comparison to the 3-5 years of performance of the IPO regarding the two chosen
company which are the Calima energy and Amcor plc (Ehrhardt and Brigham 2016). The
financial performance of both the company from the annual report of the firm is quite good
but the financial performance of Amcor limited is far better than the Calima energy limited

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which is further reflected in the share price of the firm. In the 3-5 years of the company’s
performance, Calima energy limited performed better as it shows a drastic growth in its share
price from the financial year 2009-2011. At the initial stage, the IPO of both the company
was poor but after that with the constant increase in the share price of the company the
performance of the both the company also increased significantly. Both the companies in this
case are listed in the Australian Stock exchange (Ehrhardt and Brigham 2016).
With the constant increase in the share price of the company, the motivation of the
shareholders will remain high. The shareholders of the company will be interested to make
significant investment which will automatically enhance the ability to collect cash for making
investment in the business. The stakeholders of the business will further be interested to make
investment in the new projects of the company. Undertaking of new projects with the help of
the stakeholders will further help the business to prosper in the long run. Due to such reason
it is significant for the company to maintain a healthy relationship with the shareholders of
the business (Arcand, Berkes and Panizza 2015). The overall economic situation along with
the financial position of the company is reflected in the share price of the firm.
In Response to Question 5
The dividend policy of both the firm in this assignment which is the Calima energy
limited and Amcor plc have been analyzed from the annual report of both the company
(Fisher 2018). The dividend policy whether it is monthly or yearly has been analyzed from
the annual report. Enough working capital of the firm will further help the business declare
enough dividend and it is only possible when the upper level management of the company is
effective to generate positive return out of the business (Fracassi 2016). The dividend policy
of Amcor limited is much better than the Calima energy limited due to the fact that the
working capital of the company is effective as the overall financial performance of the

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company is satisfactory. This further helped the upper level management of the company to
declare huge dividend in order to attract the interest of the shareholders. But in this case most
of the shareholders of Amcor plc will be concentrating on the growth factor rather than
receiving divined at the end of the year due to the fact the gearing ratio of the firm will
increase gradually as the company will make fruitful investment in the business instead of
paying dividend to the shareholders of the firm (Gitman, Juchau and Flanagan 2015).
The strategy of dividend which must be adopted by Calima energy limited is to pay
hefty amount of dividend to the shareholder in order to maintain the interest of the
shareholders of the firm. As the financial performance of Calima energy is not that much
good as that of the Amcor plc, it is needed for the upper level management of the company to
adopt such strategy of dividend declaration in order to maintain the interest of the
shareholders. The dividend declaration strategy is quite different as it depends on the
financial performance of the company and the effectiveness in the management system.
Conclusion
From the above discussion it can be concluded that the detailed analysis of Calima
energy limited and Amcor plc have been depicted in the conducted study. The IPO strategy of
the both the company is underpricing which means that both the company is has potential to
grow as per the current business prospect of the firm. The financial performance of Amcor
plc is better than the compared company which is the Calima energy limited. The discussion
which is made analyzed and the shareholders of both the firm will be benefited in the future
as there will be a potential business growth of the company. Hence, issuing IPO is significant
for the business to sustain in the long run as per the going concern concept of the company.

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Reference
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