The Concepts Of IPO Lock-Up
Cost of equity
Cost of equity = Risk free rate of return + Premium expected for risk
Cost of equity = Risk free rate of return + Beta x (market rate of return- risk free rate of return) where Beta= sensitivity to movements in the relevant market
Es=the expected return for a …show more content…
Most states consider preemptive rights valid only if made explicit in a corporation's charter. Also called preemptive right or subscription right.
Direct Public Offering
An offering in which IPO shares of stock are sold directly to investors, rather than through an underwriter.
A practice in a publicly-traded company that forbids management and large stockholders from selling their shares for a period of time following an initial public offering. Depending on the company, the IPO lock-up usually lasts 90 to 180 days. It exists to ensure that the market is not flooded with shares in the company at any given time, which would increase supply and cause a drop in price. Large shareholders selling their shares may also be seen as equating to a lack of confidence in the company, triggering a panic sell.
Fixed price at which a new securities issue is being offered to the public.
The Basic Procedure for a New Issue
The exact procedure to be followed by a company making a public floatation of securities will depend on the precise terms of the issue. However, the following is a summary of the principal steps that are to be borne in …show more content…
Economists disagree on how efficient markets are. Followers of the efficient markets theory hold that the market efficiently deals with all information on a given security and reflects it in the price immediately, and that technical analysis, fundamental analysis, and/or any speculative investing based on those methods are useless. On the other hand, the primary observation of behavioral economics holds that investors (and people in general) make decisions on imprecise impressions and beliefs, rather than rational analysis, rendering markets somewhat inefficient to the extent that they are affected by