Tesla puts spotlight on Saudi diversification strategy

2018 ◽  
Keyword(s):  
Initial Public Offering ◽  
Public Investment ◽  
Investment Fund ◽  
Private Company ◽  
Diversification Strategy ◽  
Sovereign Wealth Fund ◽  
Content Type ◽  
Saudi Aramco ◽  
New Strategy ◽  
Public Offering

Subject Tesla and the Saudi sovereign wealth fund. Significance Reports that Saudi Arabia’s Public Investment Fund (PIF) has pledged to support a shift by Tesla from a publicly listed stock to a private company fuelled speculation over the fate of the leading US electric car maker, and raised questions about the new strategy of the Saudi sovereign wealth fund. The subsequent reports of PIF interest in investing in one of Tesla’s US rivals, Lucid, has added to the intrigue. Impacts Promoting electric vehicles is consistent with Saudi Arabia’s diversification strategy, which also includes a major solar investment. PIF seeks to fund its global acquisitions by selling its stake in the kingdom’s main petrochemical producer SABIC to Saudi Aramco. This would complicate plans for an initial public offering of shares in Saudi Aramco.

Successful Aramco sale may squeeze Saudi finances

2019 ◽  
Keyword(s):  
Initial Public Offering ◽  
Public Investment ◽  
Investment Fund ◽  
Economic Diversification ◽  
Content Type ◽  
The Public ◽  
Price Range ◽  
High Valuation ◽  
Crown Prince ◽  
Public Offering

Significance The initial public offering (IPO) of a 1.5% stake in Saudi Aramco on December 6 reached the top end of the recommended price range, giving the company a relatively high valuation of 1.7 trillion dollars and netting a record 25.6 billion dollars for the Public Investment Fund (PIF) -- a vindication for Crown Prince Mohammed bin Salman. The shares were sold mainly to Saudi and regional investors. Impacts The PIF will deploy sale proceeds as part of a drive for economic diversification, both domestically and in acquiring global assets. Aramco’s commitment to generous dividends could pose problems if oil prices weaken. PIF spending of the domestic sale proceeds will lead to a foreign exchange outflow, either directly or through new imports.

Saudi Aramco-SABIC merger will raise strategy concerns

2019 ◽  
Keyword(s):  
Natural Gas ◽  
Public Investment ◽  
Balance Sheet ◽  
Oil Prices ◽  
Investment Fund ◽  
Content Type ◽  
The Public ◽  
Saudi Aramco ◽  
International Profile ◽  
A Share

Significance This will be used to meet part of the costs of acquiring a controlling stake in Saudi Basic Industries Corporation (SABIC), the kingdom’s principal petrochemical producer. Aramco is also looking to expand its oil marketing business and invest heavily in natural gas. Impacts The deal, and trading and gas plans, will raise Aramco’s international profile, increasing its valuation if a share offering proceeds. There is a risk that the SABIC acquisition could impair both companies’ performance and create tensions among technocrats. The proceeds of the sale will boost the Public Investment Fund (PIF) coffers. The extra debt on Aramco’s balance sheet may become burdensome if oil prices fall.

scholarly journals SPACs: post-merger survival

2017 ◽  
Vol 43 (6) ◽  
pp. 679-699 ◽  
Author(s):  
Milos Vulanovic
Keyword(s):  
Failure Rate ◽  
Initial Public Offering ◽  
Survival Rates ◽  
Institutional Characteristics ◽  
Private Company ◽  
Content Type ◽  
Sole Purpose ◽  
Foreign Companies ◽  
And Performance ◽  
Public Offering

Purpose The purpose of this paper is to study how institutional characteristics of specified purpose acquisition companies (SPACs) are related to their post-merger survival. SPACs are unique financial firms that conduct the initial public offering (IPO) with the sole purpose of using the proceeds to acquire another private company. The paper finds that institutional characteristics of SPACs are important in determining post-merger outcomes of new company, specifically when it comes to their survival/failure, i.e., increases in pre-merger commitment by SPAC stakeholders and initial positive market performance increase post-merger survival likelihood; on the contrary, mergers with higher transaction costs and focused on foreign companies exhibit increased likelihood of failure. Design/methodology/approach Using unique sample of companies conducting an IPO, namely, SPACs, with the sole purpose to execute an acquisition in the future date within limited time, this paper presents additional evidence on the survival and acquisition frequency of IPOs, and determinants of these choices. Findings Observing unique set of specified purpose companies, this paper documents that SPACs’ failure rate is at the level of 58.09 percent, higher than any previously reported failure rate in the post-IPO survival literature and comparable only to failure rates found by Hensler et al. (1997) at 55.10 percent for general companies. In addition, the paper documents similar findings to Bhabra and Pettway (2003) that prospectus and market characteristics of original companies have predictive power with respect to survival. Originality/value This study extends the literature on post-IPO survival in following ways. First, the paper documents survival rates for unique set of companies organized with the sole purpose to acquire another company. Second, the paper presents evidence on how institutional characteristics of SPAC determine their post-merged outcomes, specifically when it comes to their failures. Finally, paper contributes to the scant literature on SPACs providing new evidence on their post-merger outcomes and performance.

Saudi Arabia may prioritise non-OPEC ties

2018 ◽  
Keyword(s):  
Saudi Arabia ◽  
Initial Public Offering ◽  
Oil Prices ◽  
The United States ◽  
The Body ◽  
Oil Price ◽  
Content Type ◽  
Saudi Aramco ◽  
Regional Influence ◽  
Public Offering

Significance Ministers of OPEC and other oil-producing states are preparing to meet in Vienna. They will decide how to respond to calls -- including from the United States and India -- for producers to trim prices by supplying more oil to the market. A few producers are eager to pump more; others are vehemently opposed. Saudi Arabia and Iran -- fierce rivals for regional influence -- take different views. Impacts If OPEC releases more oil, small, less prosperous producers such as Angola, Nigeria, Venezuela and Algeria will lose faith in the body. A significant fall in oil prices would put the timing of the Saudi Aramco initial public offering (IPO) in further doubt. Absent an oil-price collapse below about 40 dollars per barrel, US shale producers will keep expanding market share.

Groupon: let's make a deal?

2015 ◽  
Vol 11 (1) ◽  
pp. 26-38
Author(s):  
Susan White
Keyword(s):  
Social Media ◽  
Initial Public Offering ◽  
Content Type ◽  
Media Companies ◽  
Secondary Sources ◽  
Long Run ◽  
Public Offering ◽  
Media Firms ◽  
Term Performance

Synopsis Groupon, an online coupon company, was one of many companies that considered an initial public offering (IPO) during what might be a second technology/internet/social media IPO boom in 2011. Some companies chose to postpone their IPOs, while others took advantage of the media attention focussed on technology companies, and in particular, social media firms. Should investors hop on the tech IPO bandwagon, or hold off to better evaluate the long-term prospects of tech companies, and in particular social media companies? Would the valuation of Groupon justify an investment in IPO shares? Research methodology The case was researched from secondary sources, using Groupon's IPO filing information, news articles about the IPO and industry research sources, such as IBIS World. Relevant courses and levels This case is appropriate for an advanced undergraduate or MBA corporate finance or investment elective. Most introductory finance classes do not have the time to cover later chapters in a finance textbook, where information about IPOs is generally found. It could also be used at the end of a core finance course, where the instructor wanted to introduce this topic through a case study of a hard-to-value internet-based company to illustrate the difficulties in setting IPO prices. The case could also be used in an equity analysis class, an entrepreneurial finance class or an investment class, to spur discussion about valuing an internet company and choosing appropriate investments for pension fund investing. This case could also be used in a strategy class, focussing on the five forces question, and eliminating the valuation question. Theoretical basis There is a great deal of literature about IPOs and their long-term performance. An excellent source is Jay R. Ritter's research, http://bear.warrington.ufl.edu/ritter, which has a longer time period and more data than could be contained in this case. IPO puzzles include persistent undervaluing of IPOs; in other words, the offer price is lower than, and sometimes substantially lower than, the first day close price. A second issue is the generally poorer long-run performance of companies after their IPO when compared to similar firms that did not do an IPO.

Does prospectus information matter in IPO pricing?

2018 ◽  
Vol 9 (4) ◽  
pp. 514-530 ◽  
Author(s):  
Rasidah Mohd-Rashid ◽  
Mansur Masih ◽  
Ruzita Abdul-Rahim ◽  
Norliza Che-Yahya
Keyword(s):  
Initial Public Offering ◽  
Institutional Investors ◽  
Ordinary Least Squares ◽  
Quadratic Model ◽  
Cross Sectional ◽  
Content Type ◽  
Ipo Pricing ◽  
The Government ◽  
Public Offering ◽  
Lower Uncertainty

Purpose The purpose of this study is to identify selected information from the prospectus that might signal the initial public offering (IPO) offer price. Design/methodology/approach This study uses cross-sectional data for a 14-year period from 2000 to 2014 in examining hypotheses relating to Shariah-compliant status, institutional investors, underwriter ranking and shareholder retention, with respect to their associations with the offer price of the IPOs. Further, this study uses ordinary least squares (OLS) for all models, including the models for both subsamples of Shariah- and non-Shariah-compliant IPOs. As for robustness, this study incorporates the quantile regression and quadratic model. Findings The results tend to provide support for the argument that firms with Shariah-compliant status reflect lower uncertainty and project better signalling of quality due to greater scrutiny by the government and thus are able to offer IPOs at higher prices. Similarly, firms with a higher proportion of shareholder retention indicate lower risks as insiders forego their options to diversify their portfolio, and hence could price their IPOs higher. Finally, the involvement of institutional investors and higher underwriter ranking could be used by firms to disregard information asymmetry, and therefore, the issuer might have to discount the IPO offer price. Research limitations/implications This study focuses solely on information in the prospectus that should not be disregarded by the investors in valuing the appropriateness of the IPO offer price. This study contributes in terms of providing a better understanding of the determinant factors of the IPO offer price of the firms which are Shariah-compliant. Originality/value This paper provides evidence for the determinants of the IPO offer price in a fixed pricing mechanism for both Shariah-and non-Shariah-compliant IPOs.

Impact of the liability of foreignness, domicile of incorporation and an institutional change on reverse merger firms’ capital-raising performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ho Wook Shin ◽  
Seung-Hyun (Sean) Lee ◽  
Min-Jung Lee
Keyword(s):  
Institutional Change ◽  
International Business ◽  
Initial Public Offering ◽  
Design Methodology ◽  
Liability Of Foreignness ◽  
Entry Barrier ◽  
Content Type ◽  
Reverse Merger ◽  
The Usa ◽  
Public Offering

Purpose The purpose of this study is to examine how the liability of foreignness (LOF), choice of incorporation and an institutional change independently and jointly affect a reverse merger (RM) firm’s capital-raising performance. Design/methodology/approach The study draws on the data of shell reverse merger transactions in the USA from 2007 to 2016. Findings This paper finds that LOF and the choice of incorporation as a signal have a significant effect on RM firms’ capital-raising performance. In addition, this study finds that the effectiveness of the signaling can be affected by LOF. Finally, this paper finds that an institutional change that lowers the entry barrier to the initial public offering (which is a superior alternate to an RM) affects the impacts of LOF and signaling on RM firms’ capital-raising performance. Originality/value The study contributes to the international business literature by examining the RM (which has been an under-researched topic in the literature) by drawing on the LOF framework. The study finds that LOF and the choice of state for incorporation affect RM firms’ capital-raising performance; moreover, these relationships are affected by an institutional change.

Part III Beyond the Transatlantic Corridor, 10 The Paradoxes of Islamic Capital Markets

2021 ◽  
Author(s):  
Jordan Cally
Keyword(s):  
Initial Public Offering ◽  
Capital Markets ◽  
International Institutions ◽  
International Markets ◽  
Islamic Finance ◽  
International Capital ◽  
Gulf Region ◽  
International Capital Markets ◽  
Saudi Aramco ◽  
Public Offering

This chapter describes Islamic capital markets. Led by Malaysia and its distinct Islamic Market, Bursa Malaysia-I, Islamic finance has entered the mainstream of international capital markets, primarily in the form of ‘Islamic bonds’ (sukuk) and fund products. Saudi Arabia, with its well-publicized Saudi Aramco initial public offering (IPO) in 2019, raised, less successfully, a different flag in the international markets. Islamic finance has infiltrated conventional markets too. Non-Islamic issuers, sovereigns, corporates and international institutions, have issued sukuk, attracted by the wash of liquidity and investors in the Gulf region. Indeed, Islamic finance has been rubbing shoulders with modern conventional finance for several decades now. As ‘conventional’ finance has become less ‘conventional’, shari'a compliant finance has become more accepted. Impediments to growth persist; the imperviousness to standardization and the artificiality of the structures underlying the financial products increase costs and possibly risk, making the products uncompetitive. However, cost is not the only consideration in the marketplace. With greater interest in ethical and ESG (environmental, social, and governance) investing, Islamic finance may be the path or the way to future markets.

Relationship between prestige signals and over-subscription ratio

2019 ◽  
Vol 15 (4) ◽  
pp. 564-579 ◽  
Author(s):  
Ali Albada ◽  
Othman Yong ◽  
Soo-Wah Low
Keyword(s):  
Initial Public Offering ◽  
Design Methodology ◽  
Executive Board ◽  
Cross Sectional ◽  
Content Type ◽  
Underwriter Reputation ◽  
Reputational Capital ◽  
Public Offering ◽  
The Relationship ◽  
Institutional Participation

PurposeThe purpose of this paper is to examine whether initial public offering (IPO) over-subscription is a function of firm’s prestige signals conveyed by third parties with reputational capital such as underwriter, auditor and independent non-executive board member.Design/methodology/approachThe relationship between prestige signals and over-subscription ratio (OSR) of IPOs is analysed using a cross-sectional regression based on a sample of 393 IPOs issued between January 2000 and December 2015.FindingsThe results indicate that IPOs underwritten by reputable underwriters have lower OSR than those underwritten by non-reputable underwriters. While issuer engages reputable underwriter to certify firm quality to reduce information asymmetry, the action brings with it lower initial returns for its IPO. Investors interpret the signal conveyed by issuer’s choice of underwriter from under-pricing perspective and respond accordingly by reducing IPO demand. This implies that investors regard under-pricing as a more valuable signal than firm quality signal associated with underwriter reputation. The findings also indicate that over-subscription increases in IPOs that have above average initial returns and higher institutional participation. Issuing firms that go public in a period of high IPO volume are associated with low OSR.Originality/valueThis is the first paper to examine the relationship between the prestige signals and OSR of IPOs in the Malaysian context.

ICOs, the next generation of IPOs

2019 ◽  
Vol 46 (6) ◽  
pp. 761-783 ◽  
Author(s):  
Mohammad Hashemi Joo ◽  
Yuka Nishikawa ◽  
Krishnan Dandapani
Keyword(s):  
Initial Public Offering ◽  
Future Development ◽  
Design Methodology ◽  
Detailed Comparison ◽  
Content Type ◽  
Blockchain Technology ◽  
Capital Funding ◽  
The Future ◽  
Public Offering ◽  
Further Development

Purpose The purpose of this paper is to recognize the benefits of the initial coin offering (ICO) as a way of raising funds and to present a detailed comparison between the ICO and the initial public offering to realize the future possibilities that this new funding method holds. Design/methodology/approach It is an exhaustive review of the ICO, the mechanism of crowdfunding, the blockchain technology behind it, benefits and current shortcomings of the ICO, and the potential future development of the ICO as a convenient and efficient way of raising capital. Findings ICOs have brought billions of dollars of funding to startups and projects worldwide in less than two years. Concurrently, many successful ICOs yielded extremely high returns to investors and believers of this new way of funding businesses. Research limitations/implications While the ICO is a revolutionary vehicle for business funding, it has raised concerns among users as well as potential investors about its risk and lack of regulation. The future of this innovative funding method highly depends on further development and placement of appropriate regulatory supervision, better understanding of risk and benefits and attaining the confidence of users. Originality/value This is a review of the advantages and drawbacks of the ICO. If the current fraud, market and cybersecurity risks can be mitigated and standardized regulations are developed, the ICO has a future to become an established way of capital funding or even replace the existing options, regardless of the size and age of companies.

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