Biggest IPO’s

Biggest IPO’s in History

In the following article, we will discuss on Biggest IPO’s. There are different ways through which a person can raise funds initial public offering is one of the ways. 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 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 issue.

After IPO’s are 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 IPO’s are;

• It increases capital for the issuer and the company gets access to the 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 the 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 obligations are avoided.
• It results 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.

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Top 10 Biggest IPO’s in History

When it comes to IPO’s 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 maybe 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’s 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

Looking at the value of the issue we can see that the Agricultural Bank of China is the biggest IPO in history. Agricultural Bank of China is the Agricultural Cooperative Bank is established in the year 1951. The bank has been evolved from a state-controlled commercial bank to a whole 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 the 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.

In 2010, “A” shares of Agricultural Bank of China was listed on the Shanghai Stock Exchange. The 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.

In the year 2010 itself, “H” shares of Agricultural Bank of China was listed on the Hong Kong Stock Exchange. The 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’s 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

The following article displays the Current Financial ratios (2013) of the companies of the biggest IPO’s in history.

P/E Ratio

 

Source: Reuters

P/ E ratio is calculated as Market Price per share/Earnings per share. P/E Multiple ratios 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 higher growth in the earnings of the companies as compared to accompany having a low P/E ratio. Looking through the graph we can see that Facebook has the highest. Price-earnings ratio whereas Bank of China has the lowest.

Price to Sales ratio

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 a high Price/sales ratio and general motors have the lowest. To come to a conclusion whether a company is really overvalued or undervalued we will have to find out its industry’s and competitors’ performance.

Price to Book Value

 

Source: Reuters

This ratio is calculated as the Current closing stock price/Latest Quarter book value per share. A company having a low Price/book value would mean that the 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 the Nippon telegraph & telephone have the lower. However, looking at this graph we cannot jump to a 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

 

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 good financial health of the company in the 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

 

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

 

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

Source: Reuters

This graph represents the growth in the share price of a company until 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 4^th 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 is on the 1^st rank in top 10 Biggest IPO’s 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 today’s 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 a person who must have invested in Facebook has got a return of 0.19% till today’s date.

Biggest IPO’s in History – Infographic

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

Recommended Articles

Here are some articles that will help you to get more detail about the IPO’s in the history of all time so just go through the link.

1. Facebook IPO
2. IPO Process
3. Benefit Of IPO