Software Firm Cost Structure and Its Impact on IPOs in the E-Commerce Era

2010 ◽  
Vol 6 (1) ◽  
pp. 19-31
Author(s):  
Richard B. Carter ◽  
Troy J. Strader
Keyword(s):  
Initial Public Offering ◽  
Cost Structure ◽  
Growth Strategy ◽  
Strategic Issues ◽  
Marginal Costs ◽  
Cost Structures ◽  
Software Firm ◽  
And Performance ◽  
Using Data ◽  
Public Offering

The first decade of the e-commerce era saw an increase in activity in the software development industries as new firms were created and existing firms made acquisitions. Many firms pursued a growth strategy and this growth required capital that was often obtained through an initial public offering (IPO) of equity. Software firm cost structures are very different from traditional physical goods firms because their marginal costs are much lower, but what is not known is whether this affects their financing strategies. In this study we compare software firm and traditional firm IPOs using data from 780 IPOs offered during the late dot-com era (1998-2002) to identify differences in firm and offer characteristics, investment risk, initial returns, and underwriting activity. We find that the characteristics and performance of software firm IPOs are significantly different from IPOs offered by raditional firms during this time period providing supporting for our conclusion that firm cost structure should be considered when analyzing IPOs and other strategic issues.

Software Firm Cost Structure and Its Impact on IPOs in the E-Commerce Era

2011 ◽  
pp. 240-251
Author(s):  
Richard B. Carter ◽  
Troy J. Strader
Keyword(s):  
Initial Public Offering ◽  
Cost Structure ◽  
Growth Strategy ◽  
Strategic Issues ◽  
Marginal Costs ◽  
Cost Structures ◽  
Software Firm ◽  
And Performance ◽  
Using Data ◽  
Public Offering

The first decade of the e-commerce era saw an increase in activity in the software development industries as new firms were created and existing firms made acquisitions. Many firms pursued a growth strategy and this growth required capital that was often obtained through an initial public offering (IPO) of equity. Software firm cost structures are very different from traditional physical goods firms because their marginal costs are much lower, but what is not known is whether this affects their financing strategies. In this study we compare software firm and traditional firm IPOs using data from 780 IPOs offered during the late dot-com era (1998-2002) to identify differences in firm and offer characteristics, investment risk, initial returns, and underwriting activity. We find that the characteristics and performance of software firm IPOs are significantly different from IPOs offered by traditional firms during this time period providing supporting for our conclusion that firm cost structure should be considered when analyzing IPOs and other strategic issues.

Price Determination in Public Offering and Evaluation Methods

2015 ◽  
pp. 144-165
Author(s):  
Ümit Hacıoğlu ◽  
Hasan Dinçer ◽  
Zuhal Akça
Keyword(s):  
Performance Evaluation ◽  
Initial Public Offering ◽  
Capital Markets ◽  
Evaluation Methods ◽  
Price Determination ◽  
Key Factors ◽  
Advanced Economies ◽  
Ipo Pricing ◽  
And Performance ◽  
Public Offering

The latest financial situation in capital markets in advanced economies, emerging markets, and the Euro zone illustrates that volatility and risks related to global economic activity and global financial markets have impact on local capital markets and directly affects the value of company stocks even though an investor diversified his/her risk by investing in a portfolio. The initial public offering process, performance evaluation methods, and price determination became key factors for companies and investors. In this chapter, advantages and disadvantages of IPO, pricing methods and performance evaluation methods are assessed.

Price Determination in Public Offering and Evaluation Methods

2017 ◽  
pp. 1293-1315
Author(s):  
Ümit Hacıoğlu ◽  
Hasan Dinçer ◽  
Zuhal Akça
Keyword(s):  
Performance Evaluation ◽  
Initial Public Offering ◽  
Capital Markets ◽  
Evaluation Methods ◽  
Price Determination ◽  
Key Factors ◽  
Advanced Economies ◽  
Ipo Pricing ◽  
And Performance ◽  
Public Offering

The latest financial situation in capital markets in advanced economies, emerging markets, and the Euro zone illustrates that volatility and risks related to global economic activity and global financial markets have impact on local capital markets and directly affects the value of company stocks even though an investor diversified his/her risk by investing in a portfolio. The initial public offering process, performance evaluation methods, and price determination became key factors for companies and investors. In this chapter, advantages and disadvantages of IPO, pricing methods and performance evaluation methods are assessed.

ASIAN AMERICAN-FOUNDED VENTURES IN SILICON VALLEY: CHALLENGES, STRATEGIC PARTNERSHIP, AND PERFORMANCE

2010 ◽  
Vol 18 (04) ◽  
pp. 355-375
Author(s):  
DAVID Y. CHOI ◽  
DONG CHEN ◽  
WOO JIN LEE
Keyword(s):  
Initial Public Offering ◽  
Asian American ◽  
Silicon Valley ◽  
Share Price ◽  
Strategic Partnership ◽  
Strategic Partnerships ◽  
Ipo Performance ◽  
And Performance ◽  
Public Offering ◽  
The Impact

This paper examines the performance of Silicon Valley ventures with Asian-American founding teams. We review some challenges faced by these ventures, compare their performance with that of other ventures, and analyze the impact of strategic partnerships on their performance. Our results indicate that firms founded by Asian American entrepreneurs tend to require more time to reach initial public offering (IPO) status than do other ventures in Silicon Valley. Our results further show that, despite needing this extra time, Asian American-founded ventures significantly outperformed their counterparts in 12-month post-IPO share price gain. This superior short-term post-IPO performance suggests that Asian American firms, particularly those that lacked relationships with U.S.-based strategic investors, might have been undervalued prior to and at IPO.

The Relationship between Boards of Directors and Initial Public Offerings in the Biotechnology Industry

1998 ◽  
Vol 22 (3) ◽  
pp. 5-29 ◽  
Author(s):  
Todd A. Finkle
Keyword(s):  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Boards Of Directors ◽  
Biotechnology Industry ◽  
Public Offerings ◽  
Biotechnology Firms ◽  
The Board Of Directors ◽  
And Performance ◽  
Public Offering ◽  
Performance Results

Utilizing the entire population of public biotechnology firms from 1980-1994, three models were tested to determine If a relationship exists between the size and composition of the board of directors and performance. Results indicate significant positive relationships between director expertise and the size of a firm's initial public offering. Going public during hot markets and larger firms were also related to larger Initial public offerings. These findings will benefit practitioners in the formation of boards within the biotechnology Industry. Managers of firms within the biotechnology industry who are contemplating a public offering will be able to proactively address the composition of their boards.

scholarly journals A Theory of Merger-Driven IPOs

2011 ◽  
Vol 46 (5) ◽  
pp. 1367-1405 ◽  
Author(s):  
Jim Hsieh ◽  
Evgeny Lyandres ◽  
Alexei Zhdanov
Keyword(s):  
Initial Public Offering ◽  
Firm Value ◽  
Empirical Support ◽  
Comparative Statics ◽  
Public Firm ◽  
Acquisition Strategy ◽  
Using Data ◽  
Valuation Uncertainty ◽  
Public Offering ◽  
The Cost

AbstractWe propose a model that links a firm’s decision to go public with its subsequent takeover strategy. A private bidder does not know a firm’s true valuation, which affects its gain from a potential takeover. Consequently, a private bidder pursues a suboptimal restructuring policy. An alternative route is to complete an initial public offering (IPO) first. An IPO reduces valuation uncertainty, leading to a more efficient acquisition strategy, therefore enhancing firm value. We calibrate the model using data on IPOs and mergers and acquisitions (M&As). The resulting comparative statics generate several novel qualitative and quantitative predictions, which complement the predictions of other theories linking IPOs and M&As. For example, the time it takes a newly public firm to attempt an acquisition of another firm is expected to increase in the degree of valuation uncertainty prior to the firm’s IPO and in the cost of going public, and it is expected to decrease in the valuation surprise realized at the time of the IPO. We find strong empirical support for the model’s predictions.

The Effects of IPO Mandatory Lockups and Corporate Governance on Underpricing: Evidence From the Australian Securities Exchange

2019 ◽  
Vol 35 (4) ◽  
pp. 854-869
Author(s):  
Janto Haman ◽  
Keryn Chalmers ◽  
Victor Fang
Keyword(s):  
Corporate Governance ◽  
Initial Public Offering ◽  
Equity Capital ◽  
Ipo Underpricing ◽  
Good Corporate Governance ◽  
Incremental Effect ◽  
Financial Strength ◽  
Equity Ownership ◽  
And Performance ◽  
Public Offering

In Australia, initial public offering (IPO) firms not satisfying profit or asset tests are permitted to list on the securities exchange with mandatory lockups (MLs) imposed on insiders’ shares. We investigate whether such lockups, and the lockup periods, are associated with underpricing. We find that the incremental effect of the association between longer ML periods and higher underpricing is stronger for firms with higher insiders’ equity ownership subject to MLs relative to firms with lower insiders’ equity ownership subject to MLs. This suggests that the extent and length of insiders’ equity ownership subject to MLs convey information regarding IPO firms’ risk. We also find that good corporate governance reduces IPO underpricing for firms with MLs. It moderates the IPO underpricing for firms with higher and longer insiders’ equity ownership subject to MLs. Our findings are informative for regulators in understanding how MLs can assist in allowing smaller and younger firms with inadequate financial strength and performance to publicly raise equity capital, while morally protecting investors and preserving market integrity.

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