Biggest IPO in history

Biggest IPO in History

 

“Whether you are in a large business or a small business, no matter since how long you are in a business infusion of funds is always welcome.”

 

 

There are different ways through which a person can raise funds initial public offering is one of the way.

Initial public offering:-

A private company sale its stock for the first time to the general public this process is known as Initial public offering i.e. IPO.

A private company can be a new, young or an old company.

Companies can raise equity capital in two ways:-

  • Issuing new shares to the public
  • Existing shareholders can sell their shares to the public

The company which offers its shares in the market is an issuer.

After IPO is released the company’s shares are traded in an open market and the investors can further sell their shares in the secondary market trading.

Why companies issue an IPO?

The different reasons why companies should issue an IPO are:-

  • It increases capital for the issuer and the company gets access to capital market for future financing needs
  • It creates a type of currency in the form of its stock which a business can use to make acquisitions.
  • Going public will improve the company’s debt to equity ratio which helps company in getting more favorable loan terms from lenders.
  • By going public the company and its management are able to retain a certain degree of control. For example if you issue shares to the venture capitalist they may require that a person of its choosing be put on the board of directors. With a public offering these sorts of obligation are avoided.
  • It result in promoting a company and the company can gain publicity and an image of stability by trading publicly.
  • Public companies are able to offer stock options, which have the potential to substantially increase in value.

Biggest IPO in history

When it comes to IPO there is always a lot of hype that gets created in the market.  Sometimes this hype works and sometimes it doesn’t work. Your company may be performing really well and may be liked by the public but just on the day of launch on the stock exchange it may become a nightmare to you and your IPO may become a super duper Flop it can be vice versa as well and your company IPO can become one of the biggest IPO in the history. Let’s look at top 10 biggest IPO in history Rank wise

Rank

Issuer (current name)

Value of issue

Listing date

Exchange Issuer country Industry sector

1

Agricultural Bank of China

$22.11B

07/16/2010

Shanghai and Hong Kong China Financial

2

Industrial & Commercial Bank of China

21.98

10/27/2006

Hong Kong China Financial

3

AIA Group

20.39

10/29/2010

Hong Kong Hong Kong Financial

4

Visa

19.65

03/19/2008

New York U.S. Financial

5

General Motors

18.14

11/18/2010

New York U.S. Consumer, Cycle

6

Enel Spa

17.28

11-02-99

Borsa Italiana Italy Utilities

7

Facebook

16.01

05/18/2012

NASDAQ GS U.S. Communications

8

NTT Mobile Communication Net

16.01

10/22/1998

Tokyo Japan Communications

9

Nippon Telegraph & Telephone

15.3

02-09-87

Tokyo Japan Communications

10

Bank of China

$13.65B

06-01-06

Hong Kong China Financial

Source – Bloomberg

Agricultural_Bank_of_China_logo.svg_Looking at the value of issue we can see that Agricultural Bank of China is the biggest IPO in history.

Agricultural Bank of China is Agricultural Cooperative Bank is established in the year 1951.

The bank has been evolved from a state – controlled commercial bank to a wholly state – owned commercial bank and subsequently a state controlled commercial bank in the year late 1970

In January 2009, the bank was restructured into a joint stock limited liability company

In July 2010, the bank was listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange, which had transformed the bank into a public shareholding commercial bank.

In 2012 , as per Fortune Global 500 the bank is ranked no 84 and as per the Bankers “ Top 1000 World Banks “ this bank is ranked no 5 on basis of profit before  tax for the year 2011.

In the year 2012, the credit ratings that were assigned to bank are

Assigned to Rating Company
The bank’s issuer A/A-1 Standard & Poor’s
The bank deposits A1/P-1 Moody’s Investors Service
The long-/short-term foreign-currency issuer default ratings A/F1 Fitch Ratings

 

The Bank’s outlook ratings assigned by the above credit rating agencies were “stable”.

ABC was the last of the “big four” banks in China to go public.

shanghaiIn 2010, “A” shares of Agricultural bank of China was listed on the Shanghai Stock Exchange. Per share cost was set in the range of 2.7RMB – 3.3RMB. The IPO Process for the Shanghai portion was handled by the companies like CICC, Citic Securities, Galaxy and Guotai Junan Securities. Including China Life Insurance and China State Construction with a lock-up period of 12–18 months, ABC sold about 40% of the Shanghai offering to 27 strategic investors.

HKExIn the year 2010 itself, “H”shares of Agricultural bank of China was listed on the Hong Kong Stock Exchange. Per share cost was set in the range of HK$2.88 – HK$3.48. On July 6, 2010, from Hong Kong stock exchange ABC raised US$19.21 billion before overallotment options were exercised. The IPO Process for the Hong Kong portion was handled by the companies like CICC, Goldman Sachs, Morgan Stanley, JPMorgan, Macquarie, Deutsche Bank and ABC’s own securities unit was also involved. For Hong Kong Offering 11 Investors were selected including Qatar Investment Authority and Kuwait Investment Authority, taking a combined $5.45 billion worth of shares.

On July 7, 2010 the company had set the final share price for the IPO launch. Despite a 15 month low for the Chinese benchmark index, the IPO went smooth and ABC officially completed the IPO process after both Shanghai and Hong Kong’s over-allotments were fully exercised on August13, 2010 and became the world’s largest first time share sale raising an initial public offering of $22.1billion and thereby surpassing the one set by Industrial and Commercial Bank of China in 2006 of US$21.9 billion.

Current Financial ratios i.e. 2013 of the companies of Biggest IPO in history 

P/E Ratio

 

PE

Source : Reuters

P/ E ratio is calculated as Market Price per share/ Earnings per share. P/E Multiple ratio suggest how much an investor is willing to pay per dollar of earnings

So a high P/E ratio suggests that an investor is expecting a higher growth in the earnings of the companies as compared to accompany having low P/E ratio

Looking through the graph we can see that Facebook has highest Price earnings ratio whereas Bank of China has the lowest.

Price to Sales ratio

P_Sales

Source : Reuters

This ratio is calculated as Price / Sales .This ratio suggests the value which is placed on each dollar of a company’s sales or revenues.

This ratio of a company should be on average as a high ratio would mean the company is overvalued whereas a low ratio would mean the company is undervalued.

Looking at the graph we can see that as compared to other companies Facebook has high Price / sales ratio and general motors has the lowest. To come to a conclusion whether a company is really over valued or undervalued we will have to find out its industry’s and competitors performance.

Price to Book value    

P_Book

Source : Reuters

This ratio is calculated as Current closing stock price/Latest Quarter book value per share.

A company having a low Price / book value would mean that company is undervalued. It could also imply that a company is fundamentally weak.

Looking at the graph we can see that Facebook has the highest price to book value and Nippon telegraph & telephone has the lower. However looking at this graph we cannot jump to conclusion whether a company is overvalued or undervalued. For this we will have to check how its sector and its competitors are performing as the number of price to book value would vary as per the industry.

Price to cash flow ratio

P_Cash-flow

Source : Reuters

This ratio is calculated as Share Price/Cash flow per share. This ratio suggests the market expectations for the future financial health of the company.

A high would imply that the market expects a good financial health of the company in future. Looking at the graph we can see that Facebook has the highest ratio whereas Nippon telegraph & telephone has the lowest. But this ratio varies as per the industry.

Net profit margin

Net-profit-margin

Source : Reuters

This ratio is calculated as net profit/net sales. It suggests that how much out of every dollar a company keeps in its earnings.

A high profit margin would mean that the company is highly profitable and it is one of the best ratios to look at when you are comparing companies in similar industries.

Return on equity

Return-on-Equity

Source : Reuters

Return on equity is calculated as Net income / Shareholders equity. This ratio measures how much profit a company has generated with the money which the shareholders have invested.  Higher the ratio better it is for the company. Looking at the graph we can see that industrial and commercial bank of china has the highest ROE.

Stock price return

Stock-Price-Return

Source : Reuters

This graph represents the growth in the share price of a company till today’s current stock price i.e. 26, February 2014.

Through this graph we can see that although the Visa Inc. was standing on the 4th rank in top 10 Biggest IPO in history according to the value of issue but this stock has performed really well after it has been launched and it has given the highest return to investors i.e. a return of 77.95% to an investor who must have invested in its IPO when it was launched.

Agricultural Bank of China being on the 1st rank in top 10 Biggest IPO in history according to the value of issue but the investor who must have invested in its IPO on the date of launch has just got a return of 5.62% till todays date.

Similarly looking at Facebook we can see that although the above ratios like Price / Earning , P/BV,  P/Sales, P / Cash flow has performed really well but  a person who must have invested in Facebook has got a return of 0.19%  till todays date.

Biggest IPO in history, Info graphic

Learn the juice of this article in just a single minute, Biggest IPO in history Infographic

 

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