WEBVTT 1 00:00:00.290 --> 00:00:02.957 (relaxed music) 2 00:00:11.198 --> 00:00:15.470 Indeed, IPOs are often used as a synonym 3 00:00:15.470 --> 00:00:17.350 However, looking at our extensive database 4 00:00:17.350 --> 00:00:18.930 of more than 5000 IPOs, 5 00:00:18.930 --> 00:00:21.310 we find that, over the last 20 years 6 00:00:21.310 --> 00:00:25.720 line:15% only 41% of IPOs in fact raised 100% fresh capital. 7 00:00:25.720 --> 00:00:29.507 line:15% 34% of IPOs offered a mix of existing and new shares, 8 00:00:29.507 --> 00:00:33.133 and 26% of IPOs did not offer any new shares at all. 9 00:00:38.200 --> 00:00:39.300 Beyond raising fresh capital, 10 00:00:39.300 --> 00:00:43.520 there are three major motivations to do an IPO. 11 00:00:43.520 --> 00:00:46.750 First, the listing provides existing shareholders 12 00:00:46.750 --> 00:00:51.210 a good opportunity to sell down all or parts of their shares 13 00:00:51.210 --> 00:00:53.550 to a new and broad set of investors. 14 00:00:53.550 --> 00:00:56.370 And additionally, the IPO also provides them 15 00:00:56.370 --> 00:00:57.720 with a platform to sell down 16 00:00:57.720 --> 00:00:59.950 their remaining shares in the future. 17 00:00:59.950 --> 00:01:04.950 Second, the IPO also provides an opportunity to monetize 18 00:01:05.420 --> 00:01:08.670 carved-out entities out of a large conglomerate, 19 00:01:08.670 --> 00:01:11.670 a strategy we currently see around the world. 20 00:01:11.670 --> 00:01:15.730 And third, the IPO also creates an acquisition currency 21 00:01:15.730 --> 00:01:18.963 that can flexibly be used in future M&A transactions. 22 00:01:25.953 --> 00:01:28.340 Yes indeed, the level of capital raised 23 00:01:28.340 --> 00:01:29.836 has a significant impact 24 00:01:29.836 --> 00:01:33.200 on the performance of the stock post-IPO. 25 00:01:33.200 --> 00:01:36.560 When looking at our 5000 IPOs since 1990, 26 00:01:36.560 --> 00:01:41.140 we find that those IPOs who have offered only existing 27 00:01:41.140 --> 00:01:43.480 shares returned 23% total shareholder return 28 00:01:43.480 --> 00:01:45.993 in the first 12 months post-IPO. 29 00:01:46.900 --> 00:01:51.220 IPOs that offered both a mix of existing and new shares 30 00:01:51.220 --> 00:01:53.270 returned 18%. 31 00:01:53.270 --> 00:01:57.543 But those IPOs who only offered new shares returned only 6%. 32 00:01:58.740 --> 00:02:01.100 This significant gap is stable over time 33 00:02:01.100 --> 00:02:03.910 and also true for different time windows 34 00:02:03.910 --> 00:02:06.010 around the IPO date. 35 00:02:06.010 --> 00:02:08.210 And it even widens for companies 36 00:02:08.210 --> 00:02:12.090 that have a very weak growth trajectory before the IPO. 37 00:02:12.090 --> 00:02:14.830 And the difference also gets bigger 38 00:02:14.830 --> 00:02:17.151 if you look into tech and telco, 39 00:02:17.151 --> 00:02:21.080 whereas in industries like consumer, industrial, 40 00:02:21.080 --> 00:02:23.293 and energy, the gap narrows. 41 00:02:30.560 --> 00:02:33.270 We believe the differences are due to the signaling effect 42 00:02:33.270 --> 00:02:35.440 associated with a public listing. 43 00:02:35.440 --> 00:02:37.700 If the listing is looking for fresh capital, 44 00:02:37.700 --> 00:02:40.460 investors just expect the capital to be used 45 00:02:40.460 --> 00:02:42.704 to deliver value-accretive growth. 46 00:02:42.704 --> 00:02:44.700 And if the equity story of the company 47 00:02:44.700 --> 00:02:46.690 doesn't look credible in this regard, 48 00:02:46.690 --> 00:02:49.950 and/or if the company is not living up to the plan, 49 00:02:49.950 --> 00:02:52.140 investors will punish the stock. 50 00:02:52.140 --> 00:02:54.330 To mitigate this risk, companies, 51 00:02:54.330 --> 00:02:57.110 especially those who want to raise a substantial amount 52 00:02:57.110 --> 00:02:58.380 of fresh capital, 53 00:02:58.380 --> 00:03:01.400 need to develop a very strong and convincing equity story, 54 00:03:01.400 --> 00:03:03.930 with clear and actionable growth initiatives, 55 00:03:03.930 --> 00:03:05.283 to persuade investors.