Finance
William M. Grissett
November 21, 2012
Module 1 Case Assignment IPO Lessons
FIN501
Dr. V. Vallillee
What type of IPO should AVG use - a traditional IPO or an online auction? Based on your analysis and findings, what would you recommend to the executives of AVG?
Based on research I believe that AVG should utilize the online or Dutch auction, where investors bid on an initial public offering before it goes public. The benefits are clear. In theory, a fair market price is set and the company reaps more cash. It is evident that AVG should take stock of the lessons learned and best practices now known from the less than spectacular Google Initial Public Offering. In traditional IPOs, prices are set low to ensure a big first day run for investment banks and their clients and being that AVG is a rather small company with a limited investor base utilizing this approach would seem to be counter intuitive. The possibility would exist with a high probability that offering goals may not be reached or sustained for any length of time post IPO.
To answer the above question, please include responses to the following issues together with other issues that you think are important:
●The type of investors AVG is likely to attract
●The lessons learned from Google and Morningstar from their auction IPOs
Don’t be afraid to try something new, the old or traditional means may not be the best way
Don’t IPO to soon
Be transparent during the process; make sure not to hide data that indicates less than optimal outlook or performance.
The online auction process is full of advantages and disadvantages from the perspective of the issuing company. On the one hand, it increases the ability of small investors to participate in the IPO process, and minimizes the traditional dominance of larger institutional investors who were lucrative clients of the underwriting investment bank. On the other hand, small investors may lack the ability to efficiently price an IPO due to lack of information.
November 21, 2012
Module 1 Case Assignment IPO Lessons
FIN501
Dr. V. Vallillee
What type of IPO should AVG use - a traditional IPO or an online auction? Based on your analysis and findings, what would you recommend to the executives of AVG?
Based on research I believe that AVG should utilize the online or Dutch auction, where investors bid on an initial public offering before it goes public. The benefits are clear. In theory, a fair market price is set and the company reaps more cash. It is evident that AVG should take stock of the lessons learned and best practices now known from the less than spectacular Google Initial Public Offering. In traditional IPOs, prices are set low to ensure a big first day run for investment banks and their clients and being that AVG is a rather small company with a limited investor base utilizing this approach would seem to be counter intuitive. The possibility would exist with a high probability that offering goals may not be reached or sustained for any length of time post IPO.
To answer the above question, please include responses to the following issues together with other issues that you think are important:
●The type of investors AVG is likely to attract
●The lessons learned from Google and Morningstar from their auction IPOs
Don’t be afraid to try something new, the old or traditional means may not be the best way
Don’t IPO to soon
Be transparent during the process; make sure not to hide data that indicates less than optimal outlook or performance.
The online auction process is full of advantages and disadvantages from the perspective of the issuing company. On the one hand, it increases the ability of small investors to participate in the IPO process, and minimizes the traditional dominance of larger institutional investors who were lucrative clients of the underwriting investment bank. On the other hand, small investors may lack the ability to efficiently price an IPO due to lack of information.