Managerial Approach of International Initial Public Offerings Valuation

Abstract

Initial public offerings (IPO) of financial instruments on international financial markets represent one of the most important financing channels not only for developed countries, but for emerging ones too. The most sensitive element of international IPOs that could determine the success or failure of them is the initial price mentioned in the prospectus. This initial price used to sell securities to individual or institutional investors is always compared with real market price and is essential for investment decision. For this reason, in almost cases of international IPOs, the underpricing effect is present. This paper discusses the problem of underpricing effect and highlights the most sensitive problems with securities’ valuation methods that are commonly used by financial managers to decide and to act in this case.

Keywords

• initial public offering
• underpricing effect
• stock valuation
• rating
• discounting
• discount rate