IPO analysis Case Study Example | Topics and Well Written Essays - 1250 words

IPO analysis - Case Study Example This technique, OpenIPO , was an invention aimed at making pricing and allocation of the IPO share a transparent and an easy-to-do process for the issuers and to do away with any possible conflicts of interests, as may arise, between the sponsors and issuers as had been the predominant case with the former/ traditional IPO. In addition, this company (W.R Hambrecht Company) also provides an option of the traditional technique, as may be the preference of the intended users who wish not use the new online initiatives. Other services such as the venture capital, M&A, market making, proprietary investments, financing of the private placements, and online brokerage businesses, are the traditional services that this institution still provide to ensure undoubted satisfaction levels of its clients. As if this is not enough, W.R Hambrecht Company further supports approximately 36 companies to attain their IPO via their new application (the online auction system) i.e., the Overstock.com and Go ogle.Inc, and other 15 companies to use the traditional style. Strategic considerations for entrepreneurs to evaluate while determining on whether to use Dutch auction or traditional IPO approach to taking a company public W.R Hambrecht Company recommends prior consultations and advisory services, as a method of strategic approach for entrepreneurs to effectively use while making business decisions on whether to use either the traditional IPO or the Dutch auction/OpenIPO. Such decisions have to be made under the premeditated considerations of; their institutions’ goals, pricing, shares allocations, and risks and returns that are linked to any of the options that a company would centralize on. For instance, both OpenIPO and traditional techniques present very different means of allocating their shares. A sponsor has higher priorities in making decisions that promptly determine the amount of shares that can be allocated to whomever suit their recommendations, an authority that is vulnerable to abuse, in the traditional IPO. This has the potential of impacting negatively in case a stock is mispriced. A substantial case is when a sponsor decides to allocate the available shares to individual accounts of business supervisory in other institutions of their business interest, a situation that is efficiently avoidable in the case of Dutch auction/ OpenIPO. OpenIPO does its allocation without malicious considerations such as personal interests in shares allocation. Thus, is guarantees fairness (no spinning) and only allocate shares to bid winners, i.e., those who placed their bids based on the price or higher factors. The second benefit of using the OpenIPO is that it guarantees an open platform for all irrespective of whether an investor is a larger institution or small enterprises, as had been the trend with the traditional IPO shares allocation. Characteristics of the OpenIPO that makes it to override the traditional IPO is that it allows limited incentives f or the small investor to purchase shares based on the underwriters’ quoted prices (which are lower), and quickly sell them off to gain a bigger profit margin. A second factor that OpenIPO will help to eliminate will be the possibility of investors to bid too low by ensuring that those who overbid and underbid are sold for the shares at equal prices. This second advantage would help the issuers to earn more, money they would have not realized while using the traditional I