COMMERCE 3FA3 Lecture Notes - Lecture 10: Greenshoe, Underwriting, Investment Banking
11 Feb 2018
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Let(cid:859)s sa(cid:455) it(cid:859)s a (cid:862)hot(cid:863) (popular, talked about) ipo. Investment bank will go through all of their contacts to ask who wants to order. These would be like large mutual funds and pension funds (multi-billion-dollar investment firms). Seo seasoned equity offer (or subsequent financing: alread(cid:455) floati(cid:374)g o(cid:374) the (cid:373)arketpla(cid:272)e do(cid:374)(cid:859)t (cid:374)eed prospe(cid:272)tus, still need to underprice by a little bit, seo when announced, stock price usually falls by approx. 3: reason for this is it sometimes sends a bad signal that this company is going out and raising equity, consider when does a company sell shares, people will think they(cid:859)re fair or overvalued. This eventually became a hot ipo, people were ready to buy it. A couple days before ipo, pri(cid:272)es started to i(cid:374)(cid:272)rease for ti(cid:272)kr s(cid:455)(cid:373)(cid:271)ol (cid:862)zoo(cid:373)(cid:863) (people were buying wrong company wrong spelling) Prices for this company started going up. 2 days later ipo was out and obviously prices went right down.
