Public Offering

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					      Public Offering


      Wall Street “lingo”
IPO underpricing and overpricing
      IPOs from abroad
          SEC filings


                          (last updated 05 Feb 09)
"PR Newswire, June 30, 1995, Friday

  "THE RATTLESNAKE HOLDING COMPANY,
  INC. (Nasdaq: RTTL) announced today that
  its initial public offering of Common Stock
  commenced on June 29, 1995.

  STAMFORD, Conn., June 30 The offering
  covered 1,300,000 shares of Common stock
  (plus 195,000 additional shares to cover over-
  allotments) at an initial public offering price of
  $5.50 per share. The offering was
  underwritten on a firm commitment basis by
  Auerbach, Pollak & Richardson, Inc.

 "Rattlesnake operates a chain of casual dining
  restaurants featuring a southwestern theme
  under the name "Rattlesnake Southwestern
  Grill."
"PR Newswire, June 30, 1995, Friday
                                                       Initial public offering?
  "THE RATTLESNAKE HOLDING COMPANY,
  INC. (Nasdaq: RTTL) announced today that
  its initial public offering of Common Stock
  commenced on June 29, 1995.

  STAMFORD, Conn., June 30 The offering
  covered 1,300,000 shares of Common stock
  (plus 195,000 additional shares to cover over-
  allotments) at an initial public offering price of
  $5.50 per share. The offering was
  underwritten on a firm commitment basis by
  Auerbach, Pollak & Richardson, Inc.

 "Rattlesnake operates a chain of casual dining
  restaurants featuring a southwestern theme
  under the name "Rattlesnake Southwestern
  Grill."
"PR Newswire, June 30, 1995, Friday
                                                       Initial public offering?
  "THE RATTLESNAKE HOLDING COMPANY,
  INC. (Nasdaq: RTTL) announced today that
  its initial public offering of Common Stock            Common stock?
  commenced on June 29, 1995.

  STAMFORD, Conn., June 30 The offering
  covered 1,300,000 shares of Common stock
  (plus 195,000 additional shares to cover over-
  allotments) at an initial public offering price of
  $5.50 per share. The offering was
  underwritten on a firm commitment basis by
  Auerbach, Pollak & Richardson, Inc.

 "Rattlesnake operates a chain of casual dining
  restaurants featuring a southwestern theme
  under the name "Rattlesnake Southwestern
  Grill."
"PR Newswire, June 30, 1995, Friday
                                                       Initial public offering?
  "THE RATTLESNAKE HOLDING COMPANY,
  INC. (Nasdaq: RTTL) announced today that
  its initial public offering of Common Stock            Common stock?
  commenced on June 29, 1995.

  STAMFORD, Conn., June 30 The offering                     “Effective”?
  covered 1,300,000 shares of Common stock
  (plus 195,000 additional shares to cover over-
  allotments) at an initial public offering price of
  $5.50 per share. The offering was
  underwritten on a firm commitment basis by
  Auerbach, Pollak & Richardson, Inc.

 "Rattlesnake operates a chain of casual dining
  restaurants featuring a southwestern theme
  under the name "Rattlesnake Southwestern
  Grill."
"PR Newswire, June 30, 1995, Friday
                                                       Initial public offering?
  "THE RATTLESNAKE HOLDING COMPANY,
  INC. (Nasdaq: RTTL) announced today that
  its initial public offering of Common Stock            Common stock?
  commenced on June 29, 1995.

  STAMFORD, Conn., June 30 The offering                     “Effective”?
  covered 1,300,000 shares of Common stock
  (plus 195,000 additional shares to cover over-
  allotments) at an initial public offering price of      “Green Shoe”?
  $5.50 per share. The offering was
  underwritten on a firm commitment basis by
  Auerbach, Pollak & Richardson, Inc.

 "Rattlesnake operates a chain of casual dining
  restaurants featuring a southwestern theme
  under the name "Rattlesnake Southwestern
  Grill."
"PR Newswire, June 30, 1995, Friday
                                                       Initial public offering?
  "THE RATTLESNAKE HOLDING COMPANY,
  INC. (Nasdaq: RTTL) announced today that
  its initial public offering of Common Stock            Common stock?
  commenced on June 29, 1995.

  STAMFORD, Conn., June 30 The offering                     “Effective”?
  covered 1,300,000 shares of Common stock
  (plus 195,000 additional shares to cover over-
  allotments) at an initial public offering price of      “Green Shoe”?
  $5.50 per share. The offering was
  underwritten on a firm commitment basis by
  Auerbach, Pollak & Richardson, Inc.                   Firm commitment?

 "Rattlesnake operates a chain of casual dining
  restaurants featuring a southwestern theme
  under the name "Rattlesnake Southwestern
  Grill."
"PR Newswire, June 30, 1995, Friday
                                                       Initial public offering?
  "THE RATTLESNAKE HOLDING COMPANY,
  INC. (Nasdaq: RTTL) announced today that
  its initial public offering of Common Stock            Common stock?
  commenced on June 29, 1995.

  STAMFORD, Conn., June 30 The offering                     “Effective”?
  covered 1,300,000 shares of Common stock
  (plus 195,000 additional shares to cover over-
  allotments) at an initial public offering price of      “Green Shoe”?
  $5.50 per share. The offering was
  underwritten on a firm commitment basis by
  Auerbach, Pollak & Richardson, Inc.                   Firm commitment?

 "Rattlesnake operates a chain of casual dining
                                                        Lead underwriter?
  restaurants featuring a southwestern theme
  under the name "Rattlesnake Southwestern
  Grill."
Underwriting

  Methods
Documentation
         Underwriting methods

• Firm-commitment        Investors
• Best efforts
• Dutch auction



                                 UW
                          (investment bank)




                          Issuer
              Underwriting methods

• Firm-commitment                   Investors

                                                Retail
                                                 firm
                                      Retail
                                       dept
IPO price             $20.00
                               UW       UW       UW
Issuer proceeds       $18.60
Spread (7%)           $1.40
 Managing UW           20%
 Selling concession    60%           Issuer
 Expenses              20%
              Underwriting methods

• Best efforts                Investors
  • Straight
  • Mini-max
  • All or nothing




                                      UW
                               (investment bank)




                               Issuer
               Underwriting methods
• Dutch auction
                               Investors
  (sell 1 million shares)


 Bid    # shares @ $ price

  1     200,000 @ $50/sh

  2     150,000 @ $45/sh              Investment
                                         bank
  3     500,000 @ $40/sh

  4     150,000 @ $35/sh

  5     300,000 @ $30/sh        Issuer
  6     400,000 @ $25/sh
               Underwriting methods
• Dutch auction
                               Investors
  (sell 1 million shares)


 Bid    # shares @ $ price

  1     200,000 @ $50/sh

  2     150,000 @ $45/sh              Investment
                                         bank
  3     500,000 @ $40/sh

  4     150,000 @ $35/sh

  5     300,000 @ $30/sh        Issuer
  6     400,000 @ $25/sh
                                      Dutch auction

                      0.45
                       0.4
Number of Investors




                      0.35
                       0.3
                      0.25
                       0.2
                      0.15
                       0.1
                      0.05
                        0
                             1   50 99 148 197 246 295 344 clearing 491 540 589
                                                           393 442
                                                              price
                                                  Valuation
Underwriting documentation
Underwriting documentation

                     Investors

                                 Retail
                                  firm
                       Retail
                        dept

                UW       UW       UW




                      Issuer
     Underwriting documentation

                          Investors
Letter of intent
                                      Retail
                                       firm
                            Retail
                             dept

                     UW       UW       UW




                           Issuer
     Underwriting documentation

                          Investors
Letter of intent
                                      Retail
Housekeeping                           firm
                            Retail
                             dept

                     UW       UW       UW




                           Issuer
     Underwriting documentation

                          Investors
Letter of intent
                                      Retail
Housekeeping                           firm
  Agreement                 Retail
   among                     dept
 underwriters
                     UW       UW       UW




                           Issuer
     Underwriting documentation

                          Investors
Letter of intent
                                      Retail
Housekeeping                           firm
  Agreement                 Retail
   among                     dept
 underwriters
                     UW       UW       UW
Underwriting
 agreement

                           Issuer
     Underwriting documentation

                                   Investors
Letter of intent
                                               Retail
Housekeeping                                    firm
  Agreement                          Retail
   among                              dept
 underwriters
                              UW       UW       UW
Underwriting
 agreement

Comfort letters    Issuer’s         Issuer
                   counsel
IPO Pricing

 Underpricing
 Overpricing
                     Rattlesnake Holdings

 Date      Price      Event
6/28/95      --       SEC makes registration “effective”
6/29/95      --       IPO postponed when UW out of business
6/30/95    $5.50      IPO – 13MM shares / $7.15 MM raised
7/16/95    $6.13      One week after IPO (up 11.5%)
8/14/95    $5.88      Down 6.8%
8/21/95    $5.75      Down 4.5%
9/11/95    $5.50      Back to IPO price
12/29/95   $5.38      Down 2.5%
4/15/96      --       BW says industry overbuilt
6/17/96      --       10Q – sales double, but lost $630,000
7/22/96    $2.75      Down 47%
7/24/95      --       Private placement - $125 MM
8/25/97    < $1.00    Delisted from NASDAQ
                “IPO phenomenon”

                            Market
First day of trading
  (avg = +16.4%)

                               Three years after IPO
                          (avg = -27.4% compared to mkt)


IPO
•   IPO Underpricing and Disclosure"
•
    USC CLEO Research Paper No. C09-9
    USC Law Legal Studies Paper No. 09-10
•   JAMES C. SPINDLER, University of Southern California Law School
    Email: jspindle@law.usc.edu


•   Using a unique data set, I find that U.S. IPO prospectus disclosure
    dramatically affects the degree of first day underpricing of the new issue,
    consistent with theories of underpricing as caused by informational
    asymmetry. In particular, a 1 standard deviation increase in positive
    prospectus disclosure is associated with almost a third reduction in first day
    underpricing. Further, this may derive from disclosure-related litigation risk:
    an increase in negative prospectus disclosure is associated with an
    increase in subsequent IPO-related lawsuits, which suggests that less
    positive (or more negative) disclosure is a reaction to litigation risk.
                “IPO phenomenon”

                            Market
First day of trading
  (avg = +16.4%)

                               Three years after IPO
                          (avg = -27.4% compared to mkt)


IPO
     Why underpricing?
   (UWs as gatekeepers)
                “IPO phenomenon”

                            Market
First day of trading
  (avg = +16.4%)

                               Three years after IPO
                          (avg = -27.4% compared to mkt)

                                 Why overpricing?
IPO                                 (ECMH)
American Depositary Receipts
Reuters Financial Service
   July 31, 1996, Wednesday

GRUPO RADIO CENTRO <RCN> OFFERING
  PRICED AT $ 7/ADS

NEW YORK, JULY 31 Grupo Radio Centro SA
  <RC.MX> said Wednesday the public offering of
  3.7 million of its American Depositary Shares
  (ADSs) was priced at $ 7.00 per ADS.
    The shares were being offered in the United
  States and elsewhere outside Mexico by the
  company and certain selling shareholders.The
  selling shareholders include a Mexican trust
  controlled by the Aguirre family, the company's
  controlling shareholders, and Clemente Serna, a
  director of the company.
    Of the total shares offered, the company will sell
  about 1.5 million ADSs, the trust will sell 1.1
  million, and Serna will offer 1.1 million. Each ADS
  represents nine of the company's CPOs, or
  Participation Certificates.
    The company said it plans to use its proceeds
  from the deal to repay a substantial portion of its
  debt.
    Bear Stearns and BT Securities are the
  managing underwriters of the offering, which is set
  to close August 2.
Fraud (tort of deceit)
• Material misrepresentation
• Intentional (defendant aware
   of truth)
• Reliance (plaintiff relies
   reasonably)
• Misrepresentation is cause of
   loss
• Damages
    Fraud (tort of deceit)
    • Material misrepresentation
    • Intentional (defendant aware
        of truth)
    • Reliance (plaintiff relies
What is reasonably)
        a “prospectus”?
    • Misrepresentation is cause of
        loss
    • Damages
What is registration statement?

           Netflix, Inc.
           (Form S-1)
          Integrated disclosure

  ’33 Act        Reg S-K          ’34 Act
Registration                     Periodic
 Statement       Reg S-X         Reports
 [S-1, S-3]                  [10-K, 10Q, 8-K]



                  ’34 Act
                   Proxy
                Statements
                   [14A]
The end