The traveling public procedure through an initial public offering ( IPO ) is one of the most important stairss that an endeavor can make during its whole life. Its mean, is non merely of import for the house itself who moves from private to public universe, but for the investors every bit good. A series of advantages comes after this procedure. To get down with, the company has now the chance to utilize new capital resources and acquire higher monetary value than it used to acquire before the traveling public procedure. Furthermore, initial stockholders can now sell their belongings and derive money from the house ‘s growing and besides make alterations in their portfolio. ( Thomadakis, S. , et al. , 2007 ) .
What makes an endeavor go public is normally a combination of different inducements. First, by publishing offerings the company additions money and hereafter investings are favored. Second, IPOs enable the proprietors make investings, something that before the traveling public procedure might non be easy to accomplish. Third, the endeavor now has the advantage of being listed in a Stock Exchange so ; future issue is easier than in the first clip. ( Jenkisnon, T. , 1990 ) .
It is obvious that, when an endeavor issues offerings, investors, investment bankers and the house itself, aim to different outlooks. To do this claim clearer ; the issuer aims to derive the best monetary value possible in order to maximise hard currency. Investors want to purchase portions in the lowest monetary value possible to accomplish the best and higher consequence in a short period. Investment bankers, have to make up one’s mind whether to dump or non the IPOs. Determining a low monetary value may puss the issuer to another investment banker. On the other manus, finding a high monetary value may frighten investors and do them avoid the current portions. ( Kucukkocaoglu, G. , 2008 ) .
When the endeavor is ready to travel public, it has to make up one’s mind the method that is traveling to utilize. Presents, there are a batch of methods used, but non all of them are proper for every company. Normally the concluding pick made depends on the size and sometimes the value of the company. Of class, companies traveling public in the same state normally adopt similar techniques. ( Jenkisnon, T. , 1990 ) .
The IPO ‘s methods used globally
The most good cognize and more frequently adopted methods worldwide for IPOs are public offers, book edifice and the auctions. Sometimes, companies adopt intercrossed method. In other words they choose to do a combination of the other methods presented. In Table 1, there is a sum-up of the IPO ‘s methods and their usage in states around the universe. ( Sherman, A. , 2002 )
Public offers or Fixed monetary value offers
As it is shown in table 1, public offerings used to be used more frequently than presents. The issue monetary value is decided first and those who want to purchase portions pay in progress for the whole sum or even portion of the portions that they have decided to acquire. ( Kucukkocaoglu, G. , 2008 ) .
It is non as widely used as in the past, particularly in the group of big active markets, but it is still popular. That is chiefly because fixed costs demanded for the distribution of the portions are low. Besides, the coaction between the investment banker and the investor does non be for a long period. In add-on, the hazard of endorser defaults is minimized since there is the duty of paying in progress. ( Sherman, A. , 2002 ) .
The book edifice method has its roots in the denationalization that became popular in the United Kingdom. During the 1990s denationalization IPOs played the most important function in national stock markets and since little local market are unable to cover with this “ moving ridge ” , book edifice became more popular to big, unfastened markets, such for illustration the US one.
In this method, there is non the duty of prepaying the order they have made, like in the Public offers. Therefore, the investment bankers have the control of the allotment of the portions. ( Sherman, A. , 2002 ) .
When auctions is decided to be used as the IPO method a monetary value scope is set alternatively of accepting commands. The concluding monetary value in which the portions are traveling to be published is formed about by the investors. ( Kucukkocaoglu, G. , 2008 ) .
Auctions are non used really frequently. In fortunes where big, good established companies, or companies with spread clients or even when widely known industries are continuing to travel public, auctions is preferred is the best available IPO method. ( Sherman, A. , 2002 )
Using the so called Hybrid method, the investment bankers make a combination of the above mentioned methods. Frequently, the book edifice / fixed monetary value combination is preferred. ( Kucukkocaoglu, G. , 2008 ) .
Table 1: State forms in IPO methods ( Sherman, A. , 2002, p. 8 )
The traveling public procedure in Greece and publishing methods used
The Athens Stock Exchange ( ASE ) is divided into three different markets ; the Main market ( about 64 % of listed houses are traded ) , which is the official stock exchange, the parallel market, proper for little companies harmonizing to their capitalisation and the new market, proper for new technological companies. ( Gounopoulos, D. , 2003 ) .
IPOs in the Athens Stock Exchange experienced a singular growing near the 2000s. The ill will of the Olympic Games enforced more and more Grecian companies to travel public. In 2000, 51 IPOs were recorded ; the Cosmote telecommunications company became private every bit good as the ETBA. These motions are equal to 2.7 billion Euros. ( Kasimati, E. , 2005 )
Harmonizing to the Grecian statute law there are three basic phases through which a company should go through before come ining the stock exchange market. First, a prospectus should be filed about the market the company is traveling to fall in, information about the company for illustration, the size of the company, its stockholders, its subordinates and by and large information which are of import to the possible investors. This prospectus should be ready to be announced to public at least 45 yearss before the company goes public and should be approved by the Capital Commission Market. If it is eventually approved by the Commission, so the board of managers of the ( ASE ) examines the offer of portions the company has decided to do and categorise the company in one of the chief classs bing harmonizing to its activities in approximately 15 yearss. Te concluding monetary value in which the portions are traveling to be issued is set by the investment banker and is announced to public one twenty-four hours after the finalisation of the populace offer. ( Gounopoulos, D. , 2003 )
Table 2: Number of IPOs listed in the ASE during January 1999 – April 2004 ( Kasimati, E. , 2005, p.25 )
Before 2001, companies listed in the ASE used the fixed monetary value method ( public offers ) in order to travel public.
To be more specific, the concluding issue monetary value decided was published in the prospectus of the company. After 2001, the issue method changed. The so on method developed is the book edifice with unfastened monetary value. The first measure to this method is the aggregation of commands. After the aggregation is completed, the concluding monetary value at which the portions are traveling to be published is set. In other words, when investors buy portions they do non yet know the exact offer monetary value. The concluding monetary value is proclaimed one twenty-four hours after the completion. ( Kasimati, E. , 2005 )
Global tendency in the IPO ‘s issue methods
Hong Kong ‘s Stock Exchange ( HKEX )
The Hong Kong ‘s Stock Exchange is the 2nd biggest stock exchange in Asia, after Tokyo ‘s. Firms which want to offer their portions at that place have to take between three chief offering methods ; the pure fixed monetary value offering, the fixed monetary value offering and the bookbuilding offerings. ( Manouz, K. , 2009 ) .
In the pure fixed monetary value offering, the underwriter sets the monetary value of the portions and publishes it to investors. This oversubscriptions rate is traveling to be added to all portions and the underpricing costs is traveling to be counted. ( Manouz, K. , 2009 ) .
In the fixed monetary value offerings method, the IPOs come after their monetary value. The offerings are separated into two different parts ; those which are traveling to be distributed to institutional investors and others which are traveling to be offered to retail investors. Therefore, two oversubscription rates occur ; and that is the chief difference between those two methods as in the pure fixed monetary value offering merely retail investors have to pay for the portions. ( Manouz, K. , 2009 ) .
Finally, in the bookbuilding offerings, we have the separation between the retail investors and the institutional. Therefore, two oversubscription rates occur in this method every bit good. Besides, retail investors have to pay the upper bound of the monetary value scope. Any involvement occurs should be based merely on the rate which occurs from the portions bought by retail investors. ( Manouz, K. , 2009 ) .
Istanbul Stock Exchange
The Istanbul Stock Exchange is the lone stock exchange that exists in Turkey since 1986. The IPO methods which exist are the fixed monetary value offerings, the book edifice method and gross revenues through the stock exchange. ( Kucukkocaoglu, G. , 2008 ) .
In the fixed monetary value offering method, the monetary value is known before the investors start purchasing portions. Investors, who desire to purchase portions, fill in a command signifier in order to advise their involvement. When all signifiers are submitted investors should lodge the money matching to their demand. When the command ‘s aggregation procedure ends the underwriter send the list of the investors to the issuer who is responsible for O.K.ing it or non. In the instance of non run intoing all the commands the corresponding sum of money is returned back to the investors. ( Kucukkocaoglu, G. , 2008 ) .
In the instance of the book edifice method, merely an approximative scope is known to the investors, non the concluding monetary value. The commands made which are above this scope are collected from the investors, who in bend pay the corresponding sum to the investment banker. When the collection period comes to an terminal, all commands, get downing from the 1 with the highest monetary value, are selected and put in a tabular array in order to do clear the monetary value degrees. The monetary value degree where the cumulative sum is bigger than the command sum, the merchandising monetary value is set. ( Kucukkocaoglu, G. , 2008 ) .
Gross saless through the stock exchange take topographic point in the primary every bit good as the secondary market. In the beginning, the sale is made to the primary market by an intermediary. Investors who have already bought portions should wait until they are traded in the secondary market. The period required between the concluding sale and the offering is at least 20 yearss. During those yearss all paperss, necessary for the procedure should be filled. ( Kucukkocaoglu, G. , 2008 ) .
European and American stock markets
Looking through the literature, it is shown that in about all European stock markets bookbuilding is the most frequent IPO method used. ( Ritter, J. , 2003 ) .
The Gallic stock market is one known for the diverseness in the IPOs methods used. Like in most European states the fixed monetary value method is non truly used. By contrast, auctions and bookbuilding are used from endeavors which go public. More often, the bookbuilding method is chosen. In the German IPOs market, the procedure begins with the bookbuilding method, but here the monetary value scope is set after. ( Ritter, J. , 2003 ) .
In the US stock markets, a monetary value scope is set and the bookbuilding procedure begins. Normally, its continuance stopping points for approximately two hebdomads. Depending on the demand, whether it is strong or non, the monetary value scope is modulated with the US Securities and Exchange Commission ( S.E.C ) . The concluding offer monetary value is more frequently set around 50 % of the file monetary value scope. ( Ritter, J. , 2003 ) . Many research workers have concluded that initial public offerings in the United States are underpriced. ( Gounopoulos, D. , 2003 ) .
To reason with, the short term procedure in Greece is equal to the planetary tendencies. What is obvious is that returns from investings be given to be lower than in other stock exchanges. Furthermore, over-performance in Greece last thirster ( normally between 18-24 months after the traveling public procedure ) than abroad. Analyzing the consequences showed in Table 3, it is clear that initial returns in Greece tend to be 48.5 % underpriced. ( Thomadakis, S. , 2007 ) .
Table 3: Surveies demoing underpriced initial returns ( Gounopoulos, D. , 2003, p.5 )