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SESSION II-1 : IPOs (20/12/2007 à 11h00)

Laurent Vilanova (Université de Lyon 2)

The Survival and Success of Penny Stock IPOs: Canadian Evidence

Auteurs : CARPENTIER Cécile and SURET Jean-Marc (Laval University) Email :

Intervenants : CARPENTIER Cécile (Laval University)

Rapporteurs : ANDRE Paul (ESSEC)

In Canada, listing requirements and financing practices have created an atypical
situation: IPOs mainly consist of micro- and penny stocks offered by non-venture-
backed companies in the developing stage. The proportion of issuers without revenues
(positive earnings) is 45% (71%) and the median issue price is CAN$0.75, less than
Euro0.50. Consequently, Canada offers a very rich context to study the effect of less
restrictive requirements on the survival and success of these issues. This situation,
where a stock market plays a role usually assumed by specialized intermediaries such
as venture capitalists, is also of interest for public policy makers. We analyze the survival
and success of Canadian IPOs based on an original sample of 2,373 issues, free of
selection or survival bias, from 1986 to 2003. Following the TSX Venture Exchange, we
consider that a newly listed company succeeds if it graduates to a senior exchange.
Using Survival functions and Cox Proportional Hazards models, we test whether the
differences between the survival and success rates are linked to the class of minimum
listing requirements in which the company is situated at the IPO. To link the listing
requirement level with the fate of newly listed companies, we divide issuers into four
categories, from the lowest level (no sales, earnings or history) to the highest (major
exchange listing requirements). Lastly, we estimate the costs and benefits in terms of
failure and success associated with easing the new listing requirements. Our research
attempts to contribute to the debate surrounding IPO regulation, listing requirements,
and the balance between investor protection and issuer financing.

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Going Public to Acquire: The Acquisition Motive for IPOs

Auteurs : CELIKYURT Ugur, SEVILIR Merih and SHIVDASANI Anil (Unc Kenan Flagler Business School) Email :

Intervenants : SEVILIR Merih (Unc Kenan Flagler Business School)

Rapporteurs : HEGE Ulrich (HEC Paris)

This paper demonstrates that the desire for making acquisitions is a primary consideration
underlying the decision of companies to go public. Using a sample of IPOs from 1994-2004,
we show that newly public firms make acquisitions at a torrid pace. This acquisition activity
is fueled both through the initial proceeds from the IPO but also through the use of an acquisition
currency that is used to raise capital for both cash and stock financed acquisitions. Acquisitions
play a more significant role in the growth of newly public firms than internal investment through
R&D and CAPEX.

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Venture Capital and Timing of IPO

Auteurs : TRABELSI Donia (University of Paris 1 Panthéon-Sorbonne) Email :

Intervenants : TRABELSI Donia (University of Paris 1 Panthéon-Sorbonne)

Rapporteurs : SENTIS Patrick (Cr2m - Gscm Montpellier Business School)

Our purpose is to find the optimal exit time of a venture capitalist (VC) under profit flow
uncertainty. We consider that the VC sells his holding in two steps: at the offer price at
the date of the initial public offering (IPO) taking into account the underpricing, then at
the expiration of the lock-up period. We use a real options approach when the profit
flow of the venture capital backed company follows an arithmetic Brownian motion. We
find a closed- form solution of the threshold at which it is optimal for the VC to exit and
also determine the expected first hitting time.

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