Corporate Finance



Aims and scope:

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Read the journal article written by Dr. Ahmed “Extreme IPO underpricing and the legal environment in wealthy emerging economies”. The article is published by the Multinational Financial Management Journal. It is an article investigates the IPOs that occurred in the GCC region between 2003 and 2010. You need to use the article as a reference.
General requirements:
• Include all references used in your report;
Initial public offerings (IPOs) can be defined as the first sale of a company’s stocks to the public. It is a transition for the company from being a privately owned enterprise to become a publicly owned one.
In recent years, the GCC region has experienced a rapid increase in the number of companies conducting IPOs and joining the stock market.
In this assignment, you are required to do a research on four IPOs of your choice, two from Tadawul and two from Dubai Financial Market.

Task 1. General information (20%)
Pick Four IPOs from the Tadawul and Dubai Financial market and do the following:
Q1. For each IPO, state when it went public and became listed in the stock market.
Q2. How much each IPO has raised in the offering? What was the offering price? How many shares were offered? State the equivalent $USD amount.
Q3. What does oversubscription mean? How much each of these IPOs were oversubscribed by? How many subscribers participated in the offering?
Q4. Allocation means the number of shares that each subscriber receives, how many shares the subscribers have received in each of your IPOs?
Q5. What does “hot issue market” mean? When did this occur in the GCC region? When was the peak of IPOs exactly? How many IPOs occurred that year?
Q6. Find the underpricing (the raw return) for each IPO?
Q7. Find the adjusted underpricing for each IPO? Adjust your answer with the general market index for every country?
Q8. Find he average raw and average adjusted underpricing for the four IPOs? Find the median underpricing for the four? What was the maximum among the four? What was the minimum among the four?
Q9. What was the opening price for your IPOs in the listing day? What was the high in the listing day? What was the low in the listing day?
Task 2: Operating performance (40%)
Compare the operating performance in terms of profitability of each of these IPOs three years before the IPO and three years after the IPO. What do you observe? Is the IPO performance better or worse after the IPO?
Task 3: Stock returns (40%)
Find the stock performance of these IPOs on a monthly basis for three years after the IPO. Do this one time using the IPO offering price and one time assuming that you are buying the share on the first day of listing off the market. How is the share performance? Was it a good investment compared to the market index.


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