Considerations for an Equity Underwriting on Nasdaq from the Perspective of an Investment Bank

Diplomarbeit von Johann Sebastian Kann

Abstract:

For the past ten years America has enjoyed a remarkably prolonged economic expansion. In 1998 and 1999 the international private investors community as well as institutional fund managers could follow an exceptional internet and e-commerce boom, reflected and followed by rising internet, biotech, pharmaceutical and new economy stocks. Especially Going Publics at that time were highly successful and an exceptionally easy way of raising capital for small and mid cap companies as well as new economy start ups. It must be said that the capital gains for day traders and speculators at that time were of low risk. This new economy boom, which was also called by pros dot com and new economy era ended in 2001, after sharp decreases in stock prices, massive losses on the US stock exchanges for institutional as well as private investors. Most of the dot com companies couldn’t perform as they thought and struggled with high debt and losses. From today’s perspective one can say that the massive international IPO floatings in the new economy were driven by too high expectations and wrong valuations.

Unfortunately, in Austria, where the financial - and capital markets could be seen as rather „thin”, small and mid cap companies have not even tried to go public in the United States of America on Nasdaq to raise capital and gain international reputation and size. Nevertheless in the future IPO’s are going to become more and more popular and important, also for Austrian companies. The goal of this Master’s Thesis is to give Austrian and international operating companies an overview about the Nasdaq, the chances and risks of IPO’s on Nasdaq and the important elements for an IPO. This thesis can be seen as equity offering manual for global operating companies that intend to go public on Nasdaq, because it puts special emphasis on the procedures of an IPO in an Investment Bank and analyses the most recent financial market developments. Furthermore it provides managements with detailed information about the parties involved in the floating and on the important steps for a successful IPO. In conclusion my thesis contains material that gives detailed information about the Initial Public Offering Process on „The National Association of Securities Dealers Automated Quotations System” (Nasdaq) between 1998 and 2001 in relation with global operating underwriters (Investment Banks).

The author not only intends to give background information about the procedure of Initial Public Offerings (IPO’s) (see chapter 8 and 9) as well as background information about the „Going Public” phenomenon (see chapter 1.2) and the phenomenon of investment banking (see chapter 1.1) for managers, but wants to link the recent New Economy and IPO boom with the current recession in the US and the similar developments in the past in Japan. It is essential to show managers which decisions in connection with an IPO are relevant and which essential elements must be well prepared to guarantee a successful Going Public. The parties involved in an IPO must be well chosen to properly organise the steps to the final floating. Most of the managers have no concrete imagination how an IPO works on Nasdaq and what to prepare for the IPO. Furthermore managers have only a vague idea what really happens in an Investment Bank during the process.

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