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Corporate Finance, 5th Edition
book

Corporate Finance, 5th Edition

by Pierre Vernimmen, Pascal Quiry, Maurizio Dallocchio, Yann Le Fur, Antonio Salvi
December 2017
Intermediate to advanced content levelIntermediate to advanced
1024 pages
32h 22m
English
Wiley
Content preview from Corporate Finance, 5th Edition

Chapter 42 Initial public offerings (IPOs)

Welcome to the wonderful world of listed companies!

Theoretically, the principles of financial management that we have developed throughout this book find their full expression in the share price of the company. They apply to unlisted companies as well, but for a listed company, market approval or disapproval, expressed through the share price, is immediate. Being listed enables companies to access capital markets and have a direct understanding of the market value of their companies.

When you see that several billion euros can change hands on financial markets in the course of a few hours (when the financial markets are not in crisis!), you understand that markets constitute a very efficient way of exchanging shares compared to the complex negotiations necessary to obtain private financing.

“Paper”, i.e. financial securities, can be placed on financial markets so quickly because:

  • financial analysts periodically publish studies reviewing company fundamentals, reinforcing the market’s efficiency;
  • listing on an organised market enables financial managers to “sell” the company in the form of securities that are bought and sold solely as a function of profitability and risk. Poor management is punished by poor share price performance or worse – from management’s point of view – by a takeover offer;
  • listed companies must publish up-to-date financial information and file an annual report (or equivalent) with the market authority.
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Publisher Resources

ISBN: 9781119424482Purchase book