What Factors Affect the Price of an IPO?

The IPO (Initial Public Offering) price, also known as the IPO issue price, refers to the price determined by a company that is permitted to issue shares for listing and its underwriters to publicly sell shares to specific or non-specific investors. In the process of determining this price, relevant influencing factors include the company's book value, operating performance, development prospects, number of shares issued, industry characteristics and market fluctuations, etc., and the quantification process of these factors will depend on the method used by the pricer There are big differences.

IPO pricing

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IPO (Initial Public Offering) price

IPO pricing is recognized as one of the most confusing problems in the international financial community, because the most successful IPO pricing is that the issuer can successfully issue at the highest price that the investor can tolerate. Failure of pricing. In this process, many factors, including the investor's price acceptance bottom line, even exceeded the issuer's own and

Through the structural analysis of the above model, we can find:

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1. The more commonly used valuation methods can be divided into two categories: income

Generally, the shares of listed companies are sold through brokers or market makers according to the terms agreed in the prospectus or registration statement issued to the corresponding securities association. Generally, once the ipo is completed, the company can apply for listing on the stock exchange or quote system.

Another possible way to obtain a listing on a stock exchange or quote system is to agree in a prospectus or registration statement to allow private companies to sell their shares to the public. These shares are considered to be "freely traded", which allows the company to meet the requirements for listing on a stock exchange or quote system. Most stock exchanges or quotation systems impose hard rules on the number of shareholders that a listed company has with a minimum number of freely traded shares.

In terms of the valuation model of ipo (initial public offering), different industry attributes, growth, and financial characteristics determine that listed companies apply different valuation models.

In the past, China has always adopted a fixed price issuance method. On December 7, 2004, the China Securities Regulatory Commission introduced a new stock inquiry mechanism, a key step towards marketization. The Hong Kong Securities Regulatory Commission and the Hong Kong Stock Exchange issued a "Joint Policy Statement on the Prospecting Mechanism" in November 1994. Since then, Hong Kong's large-scale new share issuance has basically adopted a mixed bidding mechanism with cumulative bidding and fixed price public subscription.

After the issuance method was confirmed, it entered the official issuance stage. At this time, if the number of valid subscriptions exceeds the number of planned issuances, it is an oversubscription. The higher the oversubscription multiple, the stronger the demand of investors. In the case of over-subscription, the lead underwriter may have the right to allocate shares, that is, the placing right, or may not have it, depending on the rules of the exchange. By exercising the placing rights, the issuer can achieve the ideal shareholder structure. In China, the lead underwriter does not have the right to place shares and must place shares in accordance with the subscription ratio. According to reports, the CCB issued h shares on the Hong Kong Stock Exchange. As of the deadline for public offerings (October 19, 2005), it had attracted a total of 76 billion U.S. dollars in subscription funds, nearly 9 times more than the planned number of offerings, and was made available to the public The public offering part has obtained an oversubscription ratio of nearly 40 times. The international offering part will be allocated by the joint book manager based on a variety of factors. The Hong Kong public offering part will be allocated in strict proportion in principle, but the basis of allocation may be due to the applicant. The number of shares is determined by group, but it does not exclude the possibility of drawing lots.

When over-subscription occurs, the lead underwriter can also use the "over-allotment option" (also known as "green shoes") to increase the number of issuances. "Over-allotment option" refers to an option granted to the lead underwriter by the issuer. The authorized lead underwriter can over-sell a certain percentage of shares at the same issue price within a certain period after the stock is listed. During this period, In this case, if the market price is lower than the issue price, the lead underwriter purchases this part of the stock directly from the market and allocates it to the investor who made the purchase. If the market price is higher than the issue price, the issuer will issue an additional issue directly. In this way, the relative stability of the stock price can be maintained for a certain period of time after the stock is listed, and at the same time it is beneficial to the underwriters to resist issuance risks. For example, the CCB prospectus stipulates that CICC and Morgan Stanley Tim Hui can exercise the over-allotment option on behalf of the international offering underwriter on the Hong Kong Stock Exchange within 30 days to require CCB to allocate and issue a maximum of total 3,972,890,000 additional shares, representing 15% of the global initial offer shares.