The challenges in valuating a company when it wants to make an Initial Public Offering (IPO).

Buslot, Anthony
(2021)

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Buslot_32261600_2021.pdf
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Details

Supervisors
Ruben Olieslagers
Faculty
Louvain School of Management
Degree label
Master [120] en sciences de gestion, à finalité spécialisée
Abstract
Initial Public Offerings (IPO) are enormously documented, notably IPOs under-pricings and their negative effects on firms. Nonetheless, IPOs intrinsic valuation determination, which might be the essence of such a problem, has received little attention from academicians while it is relatively important for a company to be able to be correctly valued. In addition, it has been documented that underwriters consistently miss-value a firm willing to make an IPO. Throughout this thesis, we analysed several methods in order to assess the value of a firm willing to make an IPO. We outlined that the CCA, DCF, and the DDM are the most commonly used methods. We argued that the CCA is the most reliable method followed by the DCF. Most notably, we introduced the use of the option pricing model to value the optionality of the growth opportunities that are not accounted for by common DCF models. Finally, the DDM, EVA, and SOTP seem to be unsuitable for most firms willing to make an IPO.