IPO Markets: Global Prospective
IPO markets across; Brazil, Chile, Argentina and Venezuela seems to be on the growing trend. More and more companies seem to be trading their securities in the national markets. Most of them are moving towards making or rather raising huge capital base for their own companies. Brail has witnessed a positive trend in the IPO segment. Given the fact that Brail will be hosting 2014 world cup and 2016 Olympic Games; most of the company owners understand the need of expanding their businesses in order to accommodate this population. The hotel as well as the hospitality sector have been on the forefront to have their companies shortlisted for IPO markets.
The IPO regulations in these economies consist of simple results that are flexible and are main consumer oriented. Most of the regulations that are set out are meant to caution the possible risk that an investor might be subjected to through investing in the company’s shares. Liquidation in the market is among the major risks that the regulating bodies in these economies are calling for. Liquidation of investor’s investments could subject the said investor into a deep bankruptcy. Bankruptcy of a company is brought about by taking risky strategies as well as ventures without taking the necessary precautions. IPO regulations across these huge economies are meant to safeguard the welfare of an investor compared to that of the firm. The firm puts forth the type of games that it should play in order to win the game that they are playing against other firms. These regulations guarantees for consumer welfare and safeguarding of the consumer rights contrary to that of the firms within these economies. Brail, for example, is in the forefront of allowing new market entrants to join the market with a security deposit of $487.56 billion in order to use it as a security base (Schachter 4). This amount varies from company to company depending on the number of shares that the company is preparing to sell.
The current market prices in these economies are fixed according to the prevailing market conditions. These market conditions determine the price at which a firms retailing price is to be fixed other. This price is directly proportional to the market risk factors that are taking place at the moment. For example, the market prices for IPO in Brail seem to be an all-time high due to the expected world cup event later in the year. These events guarantee for maximum return of their investment irrespective of the current market interest rate. There is a wider trading gap between these economies due to their rates of economic growth. Economic growth determines the stability of current market prices. Factors such as’ financial crisis, weakening of the dollar, inflation and other macroeconomic factors determines the rate at which these market prices will fix themselves at. The following shows the average trading market rice of IPO’s across the five economies; Brazil-$17.6, Chile- $13.4, Mexico- $14.8. Venezuela- $13.95 and Argentina- $16.7 (Cowan, 10). These prices vary from one economy to the other due to the difference in economic development and major economic events taking place in the economy.
Current Political Issues
Brail is the only economy that seems to be having a major political activity in its calendar. The presence of world cup event in July and later on, the Olympic Games in 2016 shows how well the economy is set to thrive (Chok 6). This event prepares a solid base for fruitful trading of IPO across the economy. Argentina is another economy in the Latin America region that is yet to hold its national elections. This economy is set to face plenty of shocks due to the uncertainty of the outcome of the election. The election results can’t be predicted and yet most firms will opt to take a break out of their business operations to a resting period. This is meant to slow down the process of economic development across the economy. The other economies are set to take advantage over these other economies due to their smooth run period. This will stimulate positive economic growth.
Impact of 2008 Financial Crisis
The 2008 financial crisis did affect the stunning economic performance of these economies. This brought about the downfall of most companies who were trading their shares in the financial markets. It scared away new market entrants and phased off some of the struggling firms in the market (Cowan, 3). This crisis was untimely, and most firms had not predicted this scenario. This crisis did phase off some of the firms permanently from the market due to their sudden and untimely occurrence. It caused the market prices to fall down greatly and thus affected the trading capacity of the available shares to the general public. This was a negative effect into the financial market that was brought about by the weakening of the dollar. This was due to the economic crisis that was facing the entire globe.
Chok, Jay, & Jifeng Qian. "Comparable Stocks Bounded Rational Stock Markets And IPO Entry Rates." Plos ONE 8.5 (2013): 1-8.
Cowan, Lynn. "For Deflated IPO Market, Recovery Is Still a Long Way Off." Wall Street Journal - Eastern Edition Apr. 2009: C10.
Cowan, Lynn. "Rail America IPO Augurs Ill for Buyout Exits." Wall Street Journal - Eastern Edition 14 Oct. 2009: C3.
Schachter, Ken. "IPO Markets Stagger." Red Herring (2008): 4