Page 140 - Initial Public Offering - An Introduction to IPO on Wall Street

growth markets where businesses compete aggressively for market share.

For instance, when a business is the first to IPO successfully in a tough industry, there can avail
many benefits. The opportunity to gain more market share by exploiting the influx of capital
and increased exposure created by the IPO is one of these major benefits. Many of the benefits
of going public hold greater value for an organization looking to gain market share in a
competitive sector.

Being the first publicly traded business in a sector can also, of course, have its drawbacks.
Quarterly and annual financial reports must be disclosed when a business goes public. Although
this knowledge is useful to investors, rivals may also use it to obtain insights into the plans and
activities of the business. This knowledge may be used by rivals to strengthen their plans and
practices, placing themselves in a stronger place.

The result of the IPO also provides important data to potential investors and rival companies
about the industry. In his IPO Market Timing paper, Aydogan Alti observed that “if the offer
prices of IPOs in a particular month surpassed expectations, the amount of IPOs increases
exponentially in the following months. On the flip side, the IPO market flattens if the offer
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prices are lower than expected ”.

18 https://faculty.mccombs.utexas.edu/aydogan.alti/Research/ipo.pdf

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