Choose a case company and analyst report
• Mustchooseoneofthefollowingcasecompanies:
• Thenchooseoneofanalystreportsinthe“Analyst Reports” folder on Moodle
– Must choose one of the reports on Moodle
AcF351b Project: IPO 4
Deliverable - final report
• Strict maximum of 3,500 words (excludes tables, bibliography, and appendices)
• Due at 12pm on 15 January 2024 (UK time) 1. Overview of the case company’s IPO (15%) 2. IPO literature review (20%)
3. Evaluation of an analyst report (50%)
4. Presentation and writing (15%)
AcF351b Project: IPO 5
Section 1. Overview (15%)
• Purpose: provide overview of the case company and IPO
• Compulsory topics
– Organisationalstructure(divisionswithinafirm)
– Keystakeholders(shareholders,managers,customers,etc.)
– Businessmodel(howthecompanymakesmoney)
– Corporatestrategy(costleadervs.differentiator)
– Industryenvironment(competitors)
– Recentfinancialperformance(leadinguptotheIPO)
– Stockmarketconditions(aroundthetimeoftheIPO)
– IPOcharacteristics:
• listing stock exchange, capital raising size, percentage of total shares sold, offering share
price, first day close share price, lead underwriters, and share allocation
AcF351 Project: IPO 6
Section 1. Overview (15%) cont...
• IngradingthissectionI’llbelookingfor:
– Concise and informative overview
– Make sure you cover all the topics but parts of it can be brief
• Othertips
– Only use information from around the time of the IPO (i.e., only use information that was available at the analyst report publication date)
– Don’t spend too much time discussing the company’s business model and organisational structure at the cost of omitting other important details about the company or IPO
AcF351 Project: IPO 7
Section 1. Overview (15%) cont...
• Usefulinformationsources:
– Your case company’s IPO prospectus
• Click on your IPO case company at end of course outline – You case company’s analyst reports shortly after IPO
• Three different analyst reports on Moodle
– Media reports around the time of your case company IPO
• News archives available on Library website
AcF351 Project: IPO 8
Section 2. Literature review (20%)
• Picktwotopicsforpart2ofyourfinalreport
– Topic 2A: Why do firms go public?
– Topic 2B: IPOs over time
– Topic 3A: Underpricing
– Topic 3B: Long run performance
Students can strategically choose topics that can be strongly linked to their case company
AcF351 Project: IPO 9
Section 2. Literature review
(20%) cont...
• Foreachtopic,splityourreviewintotwoparts:
1. Discuss academic theories and empirical evidence relating to those theories
• You should review academic articles (without mentioning your case company)
• A potential way to organise this section is to first talk about the theory and then the empirical evidence
• Comment on common or conflicting issues
• Be concise and logical
• This part may make up around 60-80% of your words for the given topic
AcF351 Project: IPO 10
Section 2. Literature review (20%) cont...
2. Tieyourdiscussionfrompart(a)toyourcasecompany
• Where possible, provide discussion about which academic theories and evidence seem to be consistent with your case company’s situation
– Ask yourself, do the assumptions of a theory match my case company’s situation?
– Does the theory help us to understand what happened for my case company?
• This part may make up around 20-40% of your words for the given topic
AcF351 Project: IPO 11
Section 2. Literature review (20%) cont...
You must cover at least four articles / books
• At least one article must be selected by yourself (i.e., not listed on
course outline)
• Articles must be from academic journals and not newspapers or
business magazines
Reputable academic journals (non-exhaustive list)
• The Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis, Review of Finance, Journal of Corporate Finance
• Financial Analysts Journal (practitioner journal)
AcF351 Project: IPO 12
Tips for reading papers
Recommended information sources:
• Start with the reading lists on Moodle (plus the associated lectures)
• Another good starting point is Lowry et al. (2017)
• Use Google Scholar to follow up on references and subsequent citations and use as a shortcut for writing out references in your bibliography
When reading academic papers:
• Start with the abstract and introduction (provides summary of paper)
• If you require additional information, browse the main body of text and
read any relevant sections
• Don’t be discouraged – academic paper are often difficult to read
AcF351 Project: IPO 13
Section 3. Evaluate the analyst report (50%)
Strategically choose two forecasts in your chosen analyst report
• Forecasts must be from the pro forma financial statements in your analyst report
• Forecasts must be either:
– anaccountingitem(e.g.,revenue,EBITDA,netprofit,etc.);
– aratiocalculatedfromaccountingitems(e.g.,netprofitmargin,ROE,
etc.);
– orgrowthratesofanaccountingitem(e.g.,revenuegrowth,profit
growth, etc.).
• Forecasts relating to the same accounting item (e.g., revenue and revenue growth) only count as one forecast
AcF351 Project: IPO
Section 3. Evaluate the analyst report (50%) cont...
Strategically choose two forecasts in your chosen analyst report cont...
• You can examine forecasts over several years for the same forecast item, but multiple years of the same forecast item only counts as one forecast.
• You cannot choose the forecasted discount rate, the forecasted share price, or forecasted valuation mulitples as your forecasts
• Strategically choose forecasts that the analyst discusses a lot (a good starting point is often revenue). What you read from the front page of
the analyst report may give you a good idea about which forecasts are key
AcF351 Project: IPO
Section 3. Evaluate the analyst report (50%) cont...
• Onceyouhaveselectedyourtwoforecasts,your section 3 must contain the following three subparts:
a) Background information on your analyst report and two chosen forecasts (20%)
b) Evaluation of two forecasts (20%)
c) Revision of two forecasts (10%)
AcF351 Project: IPO
Section 3 part (a) – background information (20%)
• Background information must contain:
i. The analyst’s overall investment recommendation and the strengths
and weaknesses of the investment case.
ii. A justification for why you selected your two forecasts
• I.e., why are these forecasts important to consider in general and for your case company
iii. Theanalyst’sassumptions,reasoningandevidenceusedtosupport the two forecasts that you selected.
• You will be effectively summarising and analysing how and why the analyst made the forecasts they did.
AcF351 Project: IPO 17
Section 3 part (a) – background information (20%) cont...
• Other tips:
• Given word limit constraints, you should cover point (i) briefly and
spend more time on points (ii) and (iii).
• For points (i) and (iii), it is important that you summarise and analyse in your own words and do not copy and paste from the analyst report.
AcF351 Project: IPO 18
Section 3 part (b) - evaluation of two key forecasts (20%)
• Evaluationshouldcontain:
• Adetailedevaluationofthesetwoforecastsusingquantitative
and qualitative information to substantiate your evaluation
• Evaluationquestionstoaskyourself:
• Are the analysts’ assumptions, reasons and evidence reasonable? – Alsoseethesubsequentslideforothercriticalthinkingtips
• Are these forecasts reasonable, too optimistic or too pessimistic?
• Under what circumstances may the forecasts (not) materialize?
AcF351 Project: IPO 19
Other critical thinking tips that may help with your evaluation
ü Gainknowledgeonforecastbeforebeginningevaluation(proformaandpart3 (a) (iii) helps here)
• Identify underlying assumptions of forecasts
• Look for the reasons and evidence the analyst uses to support these assumptions
ü Arethereasonsrelevant?Arethereasonswellsupportedbyevidence?
ü Istheevidenceaccurate,precise,sufficient,representative,andauthoritative?
ü Youcanalsocommentonmissingreasonsorevidencethatshouldbepresent
ü Areconflictsofinterestlikelytoleadtobiasedforecasts?
AcF351 Project: IPO 20
Section 3 part (b) - evaluation of two key forecasts (20%) cont...
If you use a wide range of information sources, you will more likely score a higher mark on this subpart.
To make the evaluation convincing, you may use as a comparison:
• The case company’s own past performance and disclosures (before the analyst report date);
• Forecasts by other analysts on same company (see Analysts Reports folder on Moodle plus can download others from Eikon);
• Analyst reports of the case companies competitors or industry surveys (need to be published on or before case company analyst report publication date);
• BUT NOT the benefit of seeing the future (ex-ante evaluation rather than ex- post) - do not compare the forecast numbers to the actual numbers that occurred in the future
AcF351 Project: IPO 21
Section 3 part (b) – final tips
In grading this section I’ll be looking for:
– Careful evaluations of the analyst’s assumptions, reasoning, and evidence
– Clear logic and information from sources other than chosen analyst report
– Evaluations of the analyst's forecasts that indicate your familiarity of the case company
– DO NOT simply restate the analyst’s arguments for their forecasts (this should have been done in part 3 (a) already)
Section 3 part (c) - revision of your chosen forecasts (10%)
• Revisionshouldcontaintwoparts:
A. Revised forecasts for you two chosen forecasts from section 3
part (b)
• Themostbasicrevisionisdirectional(i.e.,muchhigher,slightly higher, about the same, slightly lower, or much lower than the one made by the analyst) (minimum project requirement)
– E.g., “I expect revenue to grow much slower than what the analyst forecasts.”
– If in section 3 part (b) you think the analyst’s forecasts are reasonable, you can instead offer a sensitivity analysis and explain why such an analysis is important
Section 3 part (c) - revision of
your chosen forecasts (10%) cont...
• Useyournewassumptionsandcalculationstoprovidenew numerical forecasts and revise any other item(s) that may be affected by these new forecasts - do for at least two years (optional but likely to gain higher marks)
– Show any calculations in a revised pro forma statement (Appendix C)
B. Explain why your new forecasts are more appropriate than those of the analysts
• Makesuretosupportanynewforecastswithreasonsandevidence where possible (e.g., how exactly did you derive the new growth rate assumption of X% - rather than pulling numbers out of the air).
Presentation and writing (15%)
• Writing needs to be in English and in full sentences
– Claritywillberewarded(alsoproof-readmultipletimes) – Sentencestructuretip:subject,verb,object
– Avoidfillerwordsandrepetition
• Format neatly and professionally
– Fontsize12,1.5spacing,Microsoftword
• Use tables and figures sparingly
– Theyshouldservetoillustratepointsandsubstantiateargumentsrather
than substitute proper discussion and exposition in the main text – Alltablesandfiguresshouldbenumberedandhavecaptions
• All long calculations and other quantitative details should be placed in appendices
AcF351 Project: IPO 25
Other components of the report
• Missing any of the following “required” sections will result in a loss of marks
• Bibliography (Required)
– Includeallarticles,books,andotheroutsidesourcescitedinyourreport
– Orderreferencesalphabeticallybytheauthor’slastname
– Pleaseuseoneofthestandardreferencingstyles(e.g.,APA,Harvard,Chicago, etc.) – more details can be found here:
• Appendix A (Required): a screenshot of the front page of your chosen analyst report
AcF350 Project: IPO 26
Other components of the report cont...
• Appendix B (Required): Pro forma financial statements
– Replicateyourchosenanalystreport’sproformaincomestatement (compulsory) and balance sheet and cashflow statement (both optional but may help with scoring higher marks in section 3 part (c))
• Useatleastoneactualyearandtwoforecastedyears.
• Ifyouevaluateratios(includinggrowthrates)inSection3part(b)
show the calculation of those ratios
– Forthetwoforecastedyears,whenpossiblepleaseusecalculations
rather than copy and paste
• Caveat:calculationswillnotalwaysbepossiblegivenalackof information in the analyst report so copy and paste in these instances is fine – mark such instances clearly)
AcF351 Project: IPO 27
Other components of the report cont...
• Appendix B (Required): Pro forma financial statements cont...
– Use“template_appendix_b.xlsx”onMoodleasastartingpointonly
• Thistemplatewillneedtobemodifiedtomatchthelayoutof financial statements from the analyst report.
– Theobjectiveisnottoperfectlyreplicatetheanalyst'sproforma statements but rather to give you a deeper understanding of the assumptions and reasoning behind your chosen forecasts.
• Hence,pleasedonotspendtoomuchtimeondiscrepancies between your replicated numbers and those of the analyst; rather focus most of your efforts on writing your report.
AcF351 Project: IPO 28
Other components of the report cont...
• Appendix C (Optional): Revised forecasts (also in form of pro forma financial statements)
– Update the pro forma financial statements with your new forecasts, and revise any other item(s) that may be affected by these new forecasts. Do for at least two years.
– Make sure new assumptions or calculations are clearly highlighted
• Excel Appendices B and C should be submitted as a single workbook electronically
AcF351 Project: IPO 29
