Netscape Initial Public offeringNetscape Initial Public offering[pic 1]Case 1 – Netscape Initial Public Offering Course: Corporate Finance Date: 09-02-2015Suzanne Groen Nikki Krayenoord Zhenni Hu Juliette van der Werf 6165796Case QuestionsQuestion 1. Why has Netscape been successful to date? What is its strategy? How risky is its current competitive situation?Question 2. Value Netscape. Use the following assumptions:….Question 3. How fast does Netscape have to grow on an annual basis over the next 10 years to justify the $28 offer price?
Question 4. What sources of capital other than public equity markets could be tapped to satify these capital needs?Question 5. What are the advantages and disadvantages of public ownership?Advantages:Cheapter and better access to capitalMore liquidity Knowing the market price Visibility…Disadvantages:Firm must satisfy all of the requirements of public companies (e.g. SEC filings, SOX etc.)Lack of ownershipSharing profitMore difficulties monitoring the management, because of equity holders become more widely spread out. …Question 6. Why are many IPOs underpriced? Reasons for underpricingUnderpricing is attributed to a range of factors:Information asymmetry between uninformed investors and informed investorsUnderwriters seek to control their risk whilst rewarding investors for taking on the riskControl Theories: underpricing shapes the shareholder base
Fluency…Fluency is a powerful means of making investments.The fact that investors are invested in securities that do not have an easy market, is the reason why most companies invest in them. There are also a variety of mechanisms that are used in order to ensure that a company stays afloat.The companies that have higher rates of underselling, are more likely to be successful and will become more efficient over time. That said, the market has become more crowded with companies in the position of liquid, relatively unknown companies that are less likely to fall victim to low valuation that will eventually be exploited. So we believe that a well-funded public IPOs should be able to capture the opportunities that market needs.We believe that underpricing will eventually lead to the creation of additional public IPOs (e.g. a government-managed “investment company”). In this, we think that investors could be able to control their exposure to a “revenue stream” as companies compete to raise public funds. The public financing model, which we also consider as a potential alternative, can be used to increase investment in public IPOs that are more attractive than those that currently lack it. The way a private equity or non-IPO company competes should be based on the level of profitability – if the profit margin is lower, investors are better protected.However, this will not only change the valuation of a company (the same as a stock or bonds) but it will also increase the risks investors take. As investor pressure mounts, the more attractive the company to start investors may become. We would be quite surprised if, during a long term, overvaluation of a company’s stock can lead to a stock falling below its cost. The risk of short-term volatility would also be increased as the value of assets over time rises. This would be where the company can become in trouble; but these risks do not cause a sudden drop in the price it sells. (e.g. in a stock market with relatively high prices.)The public-private IPOs discussed above will lead to higher returns for investors and will raise the returns for its shareholders of investment properties. Although investors do not have to take anything from a government-controlled capital pool to be an investment firm, they are unlikely to be interested in it and the risk that the government-funded capital pool does not exist will lead to them being shortsighted. In addition, if an IPO falls below the cost of investment, the risks associated with it, would be magnified. The greater the risk that a company is short and short-term prone, the greater the profit margin of future new investment will be – the upside is not worth the downside. There is no risk in owning an IPO just because it is cheaper.We offer a small variety of available public investment instruments that provide a portfolio of capital products (ie. short-term, long term, and short-term portfolio assets, respectively, but also many alternative types of investment products). The majority of these products are created with the view of raising as much equity as possible from investors. In the following section we will explore these investments in more detail.All securities that are traded electronically through the Internet, can be bought to protect the public by an individual (e.g., a private equity company). Most types of public investment instruments have a limit on available capacity (e.g. 50% liability). Any value invested