(a) Evaluate the Extent of the Under-Pricing (or over-Pricing) for Your Company’s Ipo. What Are Some of the Possible Reasons That Could Justify the Under-Pricing (or over-Pricing) of the Company’s Ipo? How Much Money Is Left on the Table?

A rubber glove leading company, Top Glove, when to public at 27 March 2001 in connected with the Public Issue of 7,510,000 new ordinary shares of RM1.00 each and Offer For Sale of 14,240,000 ordinary shares of RM1.00 each in TOP GLOVE CORPORATION BHD. at an issue/offer price of RM2.70 per share and fully paid-up share capital of Top Glove comprising 50, 0000,000 ordinary shares of RM1.00 each on the Second Board of the Kuala Lumpur Stock Exchange [“KLSE”]

Based on the average of first week of Initial public offering [IPO] prices and its issue price, it can easily to evaluate short term performance of TOP Glove’s IPO:

Table: Data of first week Top Glove share trade price

Date (2001) 27 March 28 March 29 March 30 March

Unadjusted price (RM) 1.80 1.79 1.69 1.55

Source: Data Stream

Average first week trade price = (Total of first week trade price)/ (Numbers of day in the first week trading)

= (1.80 +1.79 +1.69 +1.55) / 4

=RM 1.708

Percentage of Underpricing / (Overpricing) = (Average first week trade price – Offering price) / (Offering price) x 100

= (1.708 – 2.70) / 2.70 x 100

= (36.74%) Overpricing

In general, IPO underpricing, or high IPO return is a common phenomenon to most stock markets, regardless of whether these markets are in developed or emerging economies (Ritter, 1984) . A number of reasons have been advanced for the new issues underpricing phenomenon, with different theories focusing on various aspects of the relations between investors, issuers, and the investment bankers taking the firms public. However, the Top Glove’s IPO shot-term performance was in a contrary road which overpriced with a 36.74% Gap. These also signal that Top Glove IPO performance failed at the primary stage as it not achieved its financing target. Therefore, there is no money left on the table for reward institution investor worked on the price discovery.

There are some possible factors that lead Top Glove’ IPO failed or overpricing occurs such as IPO Method...