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8/8/2019 1st Draft - IPO
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IPO and the choice ofstrategic partners
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Table of Content
IPO I. IPO Definition
II. Conditions for
privatization
III. Normalschedule for an
IPO
IV. Valuation
method to find thefirms equity value
V. Underwriting
VI. Price of IPO
Strategic Partners VII. Definition of
strategic partners
VIII. The role of
strategic partners IX. Selecting
strategic partner
Case Study
Recommendation
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IPO Definition
The first sale of stock by a privatecompany to the public.
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II. Conditions for privatization
Paid-up charter capital >= 10 billionsVND
Two recent years: profitable
Have a plan for capital utilization
Especially, for state-owned company,they must fulfill 2 more conditions:
Being excluded from 100% state-owned
After being evaluated firms equityvalue, the firm must remain a portionof state capital
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III. Normal schedule for an
IPO3-part transformation
process
The pre-IPO
transformationphase: restructuring
phase
The IPO
transaction
phase: achieving
goals
increase
valuation of the firm
The post-IPO
transaction phase:
execution of thepromises and
business strategies
in the preceding
stages
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IV. Valuation method to find
the firms equity value
Weighted Average Cost of
Capital (WACC)
Weighted Average Cost ofEquity (WACE)
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V. Underwriting
Underwriting:investment bankersraise investment
capital frominvestors on behalfof corporations andgovernments thatare issuing
securities (bothequity and debt) Firm commitment
Best effortsagreement
Investment banks tend
to form a syndicate of
underwriters
Types of Underwriting
Automated
Underwriting
Negotiated
Underwriting
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VI. Price of IPO
Auction price: each participants
successful auction price
Advantageous price: = 60% averagesuccessful auction price; offering to
firms staff
Negotiated/Underwritten price:
offering to investors; >= average
successful auction price
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VII. Definition of strategic
partnersParty with which a long-term agreement is
reached for sharing of physical and/orintellectual resources in achievement of
defined common objectives
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VIII. The role of strategic
partners
"If we are together nothing is
impossible.
If we are divided all will fail."
Winston Churchill
- Raise funds
- Renew human resources
- Provide technical assistance- Develop new products or services
(innovation)
- Reduce costs in supply chains
(smartsourcing)
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IX. Selecting strategic partner
Criteria:Financial capacity
Technological
standard
Managerialexperience
Reputation
Price: purchasing
stocks at the price>= average bid
price
Duration: Strategicpartners can not
transfer bought stocks
in 3 year-period from
the date of business
registration
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Case Study: VINACONEX
Background:
27/09/1988: Foreign Service and ConstructionCompany established.
24/11/2006: renamed: Vinaconex Corporation.
Area of operations: construction, labour export and
import- export.11/1995: regarded as state company.
2006: started to be equitization.
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Case Study: VINACONEX
Strategic partnersBank for Investment and Development of Vietnam(BIDV)
Saigon Securities Inc (SSI)
Vietnam Partners LLC
Savico GroupTechnological and Commercial Bank(Techcombank)
Hanoi Building Commercial Bank Joint Stock Bank(Habubank).
Major informationFace value: 10,000 VND
Beginning price: 11,000 VND
Average price: 26,029 VND
Strategic shareholders: 6.67% of chartered capital
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Case Study: VINACONEX
Evaluation of StrategicP
artnersSavico: real estate company GOOD
4 banks GOOD & BAD
Lack of Strategic Partners working in the
same industry BAD
Lack foreign investors BAD
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Recommendation
To companies
Carefully select strategic partners
(capital, technology, experiences)
To investors
Prudentially consider investing in
IPOs
(profitability, growth trends,
strategies)
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References
All materials on FMT website
http://en.wikipedia.org/wiki/IPO
http://i.investopedia.com/inv/pdf/tutorials/ip
o.pdf
http://www.investopedia.com/terms/u/under
writing.asp
http://www.saga.vn/dictview.aspx?id=660http://www.saga.vn/dictview.aspx?id=1589
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Thanks for your
attention ^^
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Q&A session