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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: aldrums who wrote (8471)	5/15/2000 7:19:00 PM
From: aldrums	Respond to of 18137

Oz, I meant to say outstanding shares.

To: aldrums who wrote (8471)	5/15/2000 8:32:00 PM
From: OZ	Respond to of 18137

1. Yes (outstanding shares) 2. To long and complicated. I Do not know a link. Basically can offer up to amount allowed on company charter. Usually less are offered. Lots of variables and not really helpful to a daytrader. OZ

To: aldrums who wrote (8471)	5/15/2000 9:51:00 PM
From: LPS5	Read Replies (2) \| Respond to of 18137

I still haven't figured out how a company decides or determines how much stock they can offer when going public The easy answer to that question revolves around three factors: 1) how much money the company wants to raise, 2) investment bankers' findings as they build their book, and 3) certain proven, historical thresholds and measures An IPO is one of several methods of financing growth, and carries with it (as do all methods) both positive and negative points. Typically an underwriting will consist of a lead underwriter (manager), sometimes co-lead managers, and other firms which compose the syndicate. At times, other firms will be involved through their relationships with syndicate members which compose a "selling group," typically retail brokerage firms. The difference is (and this goes into IB "Eastern" vs "Western" accounts, another story) basically that the selling group can take a far smaller slice of the total underwriting compensation and must return the shares if they can't be placed, etc. etc. At any rate, it is from the selling group and its' own customer base that the syndicate members, and then the lead manager of the syndicate, build an order book and try to figure out what a fair price is that will fill most orders and raise the money the company seeks. With regard to pricing the issue, you'll notice that many offerings are priced in the low teens, specifically between $12 and $14. This is because over the years, time and time again, these numbers appeal to, and have won widespread subscription of both retail and institutional investors. Lower priced offerings are retail oriented, while those higher prices...you get the picture. In addition, PE ratios for the particular sector are taken into account, as are the performance(s) of recent, similar offerings - another reason why pricings are generally done the evening before the actual IPO. Generally speaking, 500,000 shares is seen as the lowest worthwhile, manageable public float. A "decent" float permits for aftermarket liquidity, worthwhile institutional buying (they typically do so in blocks), and broad retail distribution. In addition, most underwriters will recommend that the float (however cut up in classes of shares or primary/secondary offerings) represents 10 to 40% of the issued (total) stock of the company. Less seems pointless, and more puts a company, no matter where incorporated or how many poison pills installed, at risk of loss of control. One rule of thumb: the larger the offering (UPS, GS, etc. come to mind), the more intuition and experience replace traditional IPO pricing "equations." With regard to those cheaper or smaller offerings, some underwriters try to price issues such that the interest they've calculated in their book would render a 10 to 15% pop on the IPO, but in the last few years this has often happened in greater percentages and at times with predictability. Does that answer your question, or have I missed it entirely? LPS5