Business Accounting & Finance Final Individual Assignment Answers

Assignment Question:

The assignment is based on the following documents

  • Acasestudy:‘Prada’sHongKongIPO’
  • PradaIPOprospectus
  • AnExcelfilecontainingdailysharepriceof PradafromitsIPOtoJune2014 (1913.HK shareprice)
  • Prada’sAnnualReport2013

Read the above documents and the IPO book (Initial Public Offerings-ArifKhurshed) to answer the following questions. You may wish to use external references/material from credible sources(such as financial press, journal articles):

(i) Without conducting a formal valuation analysis and based on the information given in the case study and the IPO prospectus,discuss the pricing of the PradaIPO.Would you have invested in Pradaat this price?you don’t have to conduct the valuation of Prada. You just need to assess Prada’s issue price in the light of the information provided and discussed in the case study and related documents.
(300 words)

(ii) What are IPO lock-up agreements? Describe the lock-up agreement of the PradaIPO. How was the Prada lockup agreement different from that of other markets such as the US?(300 words))

(iii) The diagram below shows the performance of Prada shares from June 2011 toJune2014.ThefirstdayofpublictradingofPrada’sshareswas24June2011.Shares were sold in the IPO at an offer price of HK$ 39.50. More information on daily share price movements is available in the Excel file(1913.HK share price)…This question relates to capital structure

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Based on a visual examination of the chart above, how does the performance of the Prada IPO compare with average IPO performance documented by past empirical studies

  1. in terms of the short term(1sttradingdayorthefirstweekof trading)?
  2. and over the longer term(3years)?

Past studies have suggested a number of explanations for short-run under pricing and long-run under performance of IPOs. Discuss the ones which you think a rerelevant to Prada’scase? (350 words)

  • In the light of the main theories of capital structure, provide a discussion of the evolution of the capital structure of Prada in the initial three years after its IPO. YouwillfindPrada’sAnnualReport2013 help fulin answering this question. (300 words)

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