Compare the advantages and disadvantages of using a Dutch Auction to a traditional underwriting method for an IPO.
Identify one real-life IPO that occurred in 202N. Try to select a company that a fellow student has not already selected.
For this one IPO, determine the following:
The initial price
The stock price at the end of the first day of trading
The stock price at the end of 10 days of trading
The stock price at the end of 30 days of trading
State the following in your post:
The total amount of the offering
The number of shares offered
The underwriter
The fees for the IPO
Evaluate the success of this IPO from the perspective of the issuer, the underwriter, and investors. Reporting that your IPO was a “success” or a failure” is insufficient. You must provide support as to why you believe your IPO was a success or a failure.
valuation of the Viking Holdings IPO (May 2024)
The Viking Holdings IPO was a Success across all three perspectives.
Issuer (Viking Holdings) Perspective: Success ✅
Financial Goal Achieved: The company successfully raised approximately $1.77 billion, making it one of the largest IPOs of 2024. This capital infusion is crucial for future growth, fleet expansion, and paying down debt, which had accumulated during the pandemic.
Optimal Pricing: The stock experienced a modest first-day "pop" from the $24.00 IPO price to $27.25 (a 13.5% increase). This is a strong indicator of success in traditional underwriting. A modest pop suggests the company did not leave an excessive amount of money on the table (as would happen with a massive first-day jump) while still showing strong investor demand that guarantees a successful offering and provides positive momentum.
Post-IPO Performance: The stock's stability and continued price appreciation to $27.53 after 10 days and $27.91 after 30 days demonstrated sustained investor confidence in the company's long-term business model, particularly its strong recovery and premium positioning in the cruise industry.
Underwriter Perspective: Success ✅
Successful Placement: The underwriters (led by BofA, J.P. Morgan, and UBS) successfully sold all 74.1 million shares, indicating they accurately gauged market demand and priced the offering effectively. The offering was well-received by institutional investors.
Substantial Fees Earned: The underwriters collected a significant fee of approximately $63.9 million (around 3.6% of the gross proceeds), a substantial payday for their advisory and distribution services.
Reputation Enhancement: As one of the largest and most successful IPOs of the year, its success burnishes the underwriters' reputations, making them more attractive for future high-profile deals.
Sample Answer
Dutch Auction vs. Traditional Underwriting for IPOs
The method a company chooses for its Initial Public Offering (IPO) significantly impacts pricing, investor participation, and post-IPO performance. Here is a comparison between the Dutch Auction and the Traditional Underwriting method.