The Initial Public Offering is the first time when company offers for selling their stock to the public. Therefore, such a company moves from private to public ownership. The goal of an IPO is to acquire the funds which will help to grow the business. However, an IPO is a risky investment because first of all, the company gives up a part of their business to the stockholders. Second of all, they don't know how much demand they will have for their stocks after the initial public offering. Nevertheless, sometimes IPOs can bring companies huge gains at the beginning, but other times they can flop (Amadeo, 2012).
The process of going public
If the business will decide to sell their stocks to the public the first step which they have to do is hire an investment bank. This bank is called the underwriter and is responsible for selling the initial shares to the public and setting the share price. The next step is filing the registration form to the SEC (Securities and Exchange Commission). The registration form includes the company profile, financial statements and information about company leadership and the shares they own. After the SEC checks all the information the underwriter in consultation with the company is ready to set up the share price and day of the IPO. Shares are first being sold in the primary market. When the company is being listed on the stock exchange then people can buy their shares on the secondary market and become a part of the business (InvestorGuide Staff, 2012).
Pandora: company snapshot
Company's profile and mission
The Pandora company is a company which specializes in distinctive jewelry. The company was established in 1982 in a small jewelry store in Copenhagen, Denmark. In the beginning the owners of the company were importing jewelry form Thailand but after demand increased for their jewelry they focused on clients from Denmark. In 1987 they were growing as successful wholesalers and hired their first designer. In 1989, the company started manufacturing their own jewelry in Thailand.
Nowadays the Pandora company manages their own designed products in the global market. Their products are available in greater than 65 countries in more than 800 stores. What is more, the company has hired more than 6000 people mainly working in Thailand in the Pandora jewelry factory (The Pandora Story, 2010).
Pandora's mission is to proffer a wide selection of high quality, hand-finished, contemporary jewelry for a reasonable price to women around the world. The jewelry products are also an opportunity for women to express their individuality by designing personal storytelling jewelry (The Pandora Story).
Company's key indicators
Pandora Company's key financial indicators for years 2008 and 2009, namely prior its initial public offering, are shown in table 2.1 below.
Table 2.1
Pandora's key indicators for 2008 and 2009, DKK millions
Indicator
2008
2009
% Growth
Revenue
1904
3461
81,8
EBITDA
778
1572
102,1
Operating profit (EBIT)
738
1424
93,0
Net profit
356
1005
182,3
Equity ratio
10%
28,4%
184
Source: Financial Reporting, 2012
The Pandora company recorded 81,8% of revenue growth in 2009 which shows an increase in sales which represents rapid expansion of the business. The EBITDA increased by 102,1% in 2009 which means that the company greatly increased their operating cash flow. The next key indicator for Pandora is EBIT which grew by 93% in 2009. This means that the company had higher earnings and therefore had better ability to pay their interest and taxes in time. Pandora's net profit growth increased by 182,3% in 2009. The equity ratio grew to 28,4% in 2009. Therefore, the company had paid for more of their assets with stockholders equity (Financial Reporting, 2012).
Pandora's IPO procedure: process, key actors and outcomes
Pandora's IPO process
Any IPO process requires profound planning and organization of all stages, otherwise any defects in the system can lead to a negative results, even sinking all the issue. First of all the aims of IPO should be firstly defined. In case of Pandora, it decided to go for an Initial Public Offering because it was a chance for the company to achieve new goals such as future growth of the business, gaining money for building a company profile, and creating a stronger brand. The IPO was also an opportunity for the company to increase the range of its products, especially on the new markets in which they wanted to come into being (Ringstrom and Acher, 2010).
Pandora S/A certainly took the IPO with very serious attitude and carefully planned all the process. Figure 3.1 summarizes information on stages, which Pandora underwent in order to become public company, as well as gives the time frames for each of the stage.
First of all, it should be mentioned that, however all the IPO process started itself in 2010, company planned this since 2008. Thus, in 2008 the Pandora holding AXCEL Invst was established. AXCEL Invst acquired almost 60% of Pandora's private equity through buying the parts of company in firstly issued shares (but not for the public listing).
Source: own projections, based on Pandora's press releases and announcements
Figure 3.1. Pandora's IPO process
The IPO process itself started on 7th of September, 2010, when Pandora was contemplating listing on NASDAQ OMX Copenhagen stock exchange. Therefore, this is the first stage of IPO process, so Pandora started planning which market they wanted to be listed in, they chose a global coordinator, set up the schedule and timetable and prepared preliminary valuation.
The preliminary valuation was prepared by Jyske Bank in order to set the appropriate offering price of Pandora's shares. The table 3.1 shows Pandora's valuation results (table is placed at the end of the section). The method which was used for this process was DCF, which stands for discount cash flow. Therefore, this method is used to show the present value of company performance in the future.
The next step which the company did was preparing due diligence, filing the registration statement for SEC to be listed on the stock exchange and preparing all the necessary documents. Such an event was completed on September 20, 2010 when Pandora published their offering documents and established a price range.
Certainly, the main document, submitted by the companies for the IPO, is their prospectus. As it was already mentioned, Pandora published its prospectus on 20th of September. Prospectus, comprised of 250 pages, profoundly explains all advantages, disadvantages and risks, associated with Pandora's operating activities and discloses all information on company's business. Moreover, what is one of the most important for an IPO, prospectus states the range of Pandora's share price. The method of price-setting was the open-price bookbuilding, which is currently the most common approach. According to this method, the price range was set between DKK 175 to DKK 225 per share. Such price range predicted the equity value for the company at about DKK 22.9 to DKK 29.2 billion. A final share price was planned to be announced before or on October 5th 2010, when the company was expected to be listed on the NASDAQ OMX Copenhagen.
The next stage of Pandora's IPO was the marketing stage thus preparing the communication campaign, often referred to as "roadshow". The aim of this stage was to present to potential investors the issue of Pandora's securities and persuade these buyers to invest in Pandora, as it is highly valued business with growth prospects. During roadshow all major future shareholders were found.
On September 23, 2010 the bookbuilding started which was the last stage of the IPO. Bookbuilding helped the company get an idea for the demand of the IPO which, in turn, helps set up an offering price. This method results in less underpricing than a fixed-price offering. In the offering stages the company set the offering price which in Pandora's case was DKK 210 per share. This stage is also responsible for offering on the greymarket which is the market where shares can be bought or sold before they will be officially available on the stock exchange. The bookbuilding was closed on October 4, 2010. On October 5, 2010 the company started trading at DKK 210 price per share for their Initial Public Offering. They were officially listed on NASDAQ OMX Copenhagen under the PANDORA trading symbol in the Apparel, Accessories & Luxury Goods sector (Facts About the Share, 2010; Company Announcement, 2010; Pandora Press Release, 7.09.2010; Pandora Press Release, 20.09.2010).
To finish the process of Pandora's IPO, it was decided by showing the valuation of the company. As it was already mentioned above, Jyske Bank analysed Pandora Company as a part of due diligence procedure. The results, obtained were more than satisfactory, as during the estimated period (from 2009 till 2019) company was predicted to show very good prospects.
The table 3.1, given below, presents Pandora's discounted cash flow summary from 2010 to 2019. The Jyske Bank is predicting that for nine years after going public the company will still show growth. Directly after the IPO in 2010 they expected rapid growth for example, for sales 80% and EBIT margin around 40%. Nevertheless, in the following years the company is expecting slow but steady growth.
Table 3.1
Pandora's valuation (DCF summary)
dcf summary.png
Source: Jyske Bank, 2010
Pandora's underwriters
Not only the right time and appropriate process determines the successful outcome of IPO, but also the choice of right underwriters, who have enough experience and will exert themselves to make the best IPO for the company.
The underwriters that were working for Pandora's IPO were Goldman Sachs International, J.P. Morgan Securities Ltd., Morgan Stanley & Co. International plc and Nordea Markets (Division of Nordea Bank Danmark A/S). These companies were the Global Coordinators and Joint Bookrunners in the Offering. Carnegie Bank A/S and SEB Enskilda, Skandinaviska Enskilda Banken AB (publ), Copenhagen branch, were acting as Co-Lead Managers. The chart below shows the distribution of the fees paid to the underwriters from Pandora during their IPO. N M Rothschild and Sons Limited and FIH PARTNERS A/S were acting as financial advisors to Pandora during the process as well (Company Announcement, 2010).
Pandora signed with all abovementioned parties an underwriting agreement, namely its type which is known as "Firm Commitment". According to this contract, the Pandora's underwriters guarantee the sale of the issued stock at the agreed-upon price, taking all the risk of IPO failing at themselves. Surely, such a type of agreement is quite costly for the issuing company, however it decrease the risk of failing the issue.
Source: Pandora
Figure 3.2. Allocation of Pandora's Underwriters' fees
The figure 3.2 above represents the allocation of fees between Pandora's underwriters, according to the agreement, signed between Pandora and its Global Coordinators and Joint Bookrunners. Thus, each from Goldman Sachs International, J. P. Morgan Securities Ltd., and Morgan Stanley and Co. International received 25% of fees, whereas remaining 25% were divided between the rest 3 banks.
3.3. Pandora's IPO: key information on offering
After the process and its stages of Pandora's IPO were specified, the key information on the offering can be mentioned now. All this information has been summarized and is presented in table 3.2 below.
Table 3.2
Highlights of Pandora's IPO
Company's name (after IPO)
Pandora A/S
Stock symbol
"PNDORA"
IPO place
NASDAQ OMX Copenhagen
IPO date
5th of October, 2010
IPO price
DKK 210
Total number of Offer Shares
if the Overallotment Option is not exercised
47 409 927
if the Overallotment Option is exercised
54 092 844
Value of offering
if the Overallotment Option is not exercised
DKK 9,96 billion
if the Overallotment Option is exercised
DKK 11,36 billion
Initial Market Capitalization
DKK 27,33 billion
Price-setting method
Open-price bookbuilding
Company valuation method
DCF
Source: based on Pandora's IPO prospectus
Thus, based on the table, presented above, it can be noticed that Pandora Company after going public will be named as Pandora A/S. Its shares will start trading on 5th of October in 2010 on NASDAQ OMX Copenhagen under the stock symbol "PNDORA" for the offering price, set at the level of DKK 210. To set such level of price such method was used as open-price bookbuilding, while the whole company was valued by discounted cash flow technique. All this was profoundly explained in the previous section of the paper.
What hasn't been discussed yet, but which requires quite much attention, is Pandora's number of shares. As stated in the table 3.2, the number of company's shares can deviate from 47 410 thousands to 54 100 thousands. The final number of shares depends on whether the overallotment option is exercised or not. By the overallotment provision (also known as "greenshoe option") the possibility of underwriters to issue additional number of shares (at offering price) for trading should be understood. Usually, this option is used to safeguard company against risks in case IPO of its shares will not be highly demanded. But also the "greenshoe" is used when on the market there is much higher demand on company's shares, than it was initially predicted. All this is namely connected with the fact that accurate final demand on shares is extremely difficult to predict.
Source: own projections, based on Pandora's company announcement #1 from 05.10.2010 C:\Users\Ðлинка\ALINA\навчаннÑ\AAA POLSKA\2nd YEAR\kurnicki\shares.png
Figure 3.3. Total number of Pandora's offer shares
In case of Pandora, as depicted on figure 3.3 above, its underwriting agreement provided a "greenshoe" option, giving an opportunity to issue additionally almost 6 700 thousands shares. Except this, the figure shows information about the structure of company shares, namely which are already existing, and which are newly offered. The structure is as following: 94% of already existing shares, which are the shares issued in 2008 when Pandora established its holding company AXCEL, as it was planning to go for IPO in the future. The rest 6% are new shares, which are offered by Pandora's IPO additionally.
Going back to Pandora's overallotment provision ("greenshoe"), it was agreed between Pandora's management and its Joint Global Coordinators that in case of high demand on shares this option can be exercised, but not later than on 4th November of 2010. Surely, an overallotment has a significant impact on company's capital structure, as it determines how large portion of company will be held by its selling shareholder. To examine the changes in Pandora's capital structure in the result of IPO, let's proceed to the next section of our paper.
3.4. Pandora's ownership structure changes
After the initial public offering, when companies are going public, their ownership structure are undergoing significant changes, as now the owners are not only managers or other private persons, but public investors as well. Regarding Pandora's ownership and changes in it, it is represented in table 3.3 and more detailed graphically on the figure 3.4 below.
Table 3.3
The ownership of Pandora Company prior and after IPO
Ownership of the company
Prior IPO
Post IPO (without greenshoe)
Post IPO (with greenshoe)
Selling Shareholder (SS)
100%
62,60%
57,50%
New shareholders
−
35,90%
41,00%
Others
−
1,50%
1,50%
Total
100%
100%
100%
Source: own projections, based on Pandora's press releases and announcements
C:\Users\Ðлинка\ALINA\навчаннÑ\AAA POLSKA\2nd YEAR\kurnicki\ownership.png
Figure 3.4. The ownership of Pandora Company prior and after IPO
So, as it can be easily seen from the table and the figure above, prior the initial public offering all the company was owned by its selling shareholder, denoted by letter SS (Selling Shareholder) and shares of which is shown in white colour on the pie chart. However, it should be also mentioned that the ownership in SS is also subdivided. Thus, prior IPO 59,3% of SS (and of all the Pandora company) was owned by Axcel Invst, which is the company established by Pandora in 2008 and which acquired the significant part of Pandora's private equity. Other parts of private equity belonged to the family members, who founded Pandora Company, as well as to its key employees. Thus, Pewic Holdings are just shares held directly by Per Enevoldsen (40% of Pewic), Winnie Enevoldsen (40%) and Christian Enevoldsen (20%). RSMLP Holding is the fund, owned by Pandora's key employees, namely by Michael Lund Petersen, René Sindlev and Sindlev's family. And finally, under the Pandora leadership the ownership by Pandora's management should be understood, as this fund belongs to Thomas Nyborg, Torben Ballegaard Sørensen, Erik D. Jensen and John White.
After the IPO Pandora's ownership will be divided between its previous owners, to which we refer as SS (selling shareholders), and between new shareholders. However, the portion of new shareholders largely depends on whether the overallotment option will be exercised or not. Without this option, company by 62,6% will be owned by SS, and by 35,90% - by new shareholders. But if "greenshoe" will take a place, company's free floating rate will increase from 35,9% to 41%, resulting in smaller portion of SS holdings (just 57,5%). Nevertheless, in both cases the majority of shares will be owned by SS, which enables them to further control the whole company and which decreases the risk of hostile takeover.
3.5. First trading day outcomes
The first day of Pandora's share listing, as it was already mentioned above, was the 5th of October 2010, when at 08:00 a.m. (Central European Time) on NASDAQ OMX Copenhagen the first Pandora's shares were traded. First trading day turned out to be very successful for Pandora S/A, making it one of the major Danish listing over the recent years, as well as becoming the fourth largest European IPO and one of the year's top 20 in 2010 (Forbes).
It should be recalled, that offer price was set at the level of DKK 210 per share. In reality first trading day showed that such price was too low for the company's share, as a closing price on 5th of October 2010 for Pandora's share reached DKK 263. Such situation shows the significant undervaluation of the firm. Actually, according to analysts, on average the initial public offerings are underpriced by about 15% relative to the after-market price, which is the price immediately following its sale (Shapiro, p.443). The main assumption, which lies in this undervaluation, is the information asymmetry hypothesis, combined with the willingness of underwriters to secure them against the risk of sinking the issue. However, in our case the undervaluation of Pandora's shares was far more significant, going beyond the average level. Namely after-market price (DKK 263) was by 25,24% higher than the offering price. The graphical representation of this is given in picture 3.5 below, making it easy to compare two prices.
Source: own projections, based on NASDAQ OMX Copenhagen informationC:\Users\Ðлинка\ALINA\навчаннÑ\AAA POLSKA\2nd YEAR\kurnicki\undervalue.png
Figure 3.5. The comparison offering price and after-market price of Pandora's share
Surely, such an undervaluation of company's shares implies that the opportunity of the firm to raise additional funds was lost. In corporate finance theory such situation refers to so-called concept of money "left on the table". The lost money for Pandora S/A can be calculated by applying the formula, presented below.
Thus, substituting the indicators by appropriate numbers, we will get the result for Pandora as following:
Money "left on the table" by Pandora A/S = (DKK 263 - DKK 210) * 47 409 927 shares = DKK 2 512 726 131 ≈ DKK 2,513 billion
According to the obtained results, it should be stated that Pandora lost their opportunity to get extra 2,513 billion of DKK. This can be argued as a mistake of Pandora's underwriters, named by company as the Joint Global Coordinators. Nevertheless, the first trading day showed a great success. The shares of Pandora A/S were highly demanded, that led to an exercise of the overallotment provision ("greenshoe") on 8th of October, 2010, when Pandora's underwriters issued almost 6 700 thousands of additional shares. This helped company to raise its offering value from initial DKK 9,96 to DKK 11,36 billion.
But whether the company was able to continue such positive achievements on stock exchange and further increase its stock price or not, is examined in the next section of this paper, where the information of company's performance 2-years after IPO is disclosed.
4. Pandora A/S: company's performance 2 years after IPO
Analyzing IPO case, it is crucially important not only to focus on IPO itself and the launch of trading, but also to verify whether the company was able to proceed with further success and whether it has reached its IPO goals.
In case of Pandora A/s, it has been over 2 years since it went public on 5th of October in 2010. During these years a lot of significant changes can be noticed in financial position of the company, most of which are actually not positive at all. Thus, table 4.1 gives a sum-up of Pandora's key indicators from period of 3rd quarter 2009 to the 3rd quarter of current year (2012). This will help to define the main tendencies.
Table 4.1
Pandora's key indicators, 3rd quarters of 2010-2012, DKK millions
before IPO
after IPO
Q3 2009
Q3 2010
Q3 2011
Q3 2012
Revenue
825
1788
1569
1794
% YtY change
116,73%
-12,25%
14,34%
EBITDA
309
807
536
503
% YtY change
161,17%
-33,58%
-6,16%
Net profit
153
581
341
380
% YtY change
279,74%
Table 4.1 (continued)-41,31%
11,44%
Free cash flow
142
30
37
-88
% YtY change
-373,33%
18,92%
142,05%
Number of stores
9922
10386
10400
10220
Source: own calculations, based on Pandora's company reportsAbsolute change
464
14
-180
Thus, during Pandora's publicly trade period of time, it hasn't improved its financial situation, as was planned and expected, but on the contrast only the significant deterioration occurred. Taking, for example, company's revenues, it can be noticed that since 2010 they haven't increased significantly, even has dropped in 2011. Regarding EBITDA and Net Profit, these two indicators have declined considerably during the analyzed period. EBITDA of 3rd quarter of year 2012 decreased by 37,7% in comparison to 3rd quarter of 2010, whereas Net Profit decreased by 34,6%. And concerning company's cash flow, it has declined significantly - from DKK 30 billion in 2010 to negative number of -88 billion in 2012. Moreover, the goal of IPO was not met - as company planned to open new stores, but in fact number of which has only declined (from 10 400 stores in 3rd quarter of 2010 to 10 220 in 3rd quarter of 2012).
Source: own projections, based on Pandora's company reports
Figure 4.1. Pandora's key indicators, 3rd quarters of 2010-2012, % change
The graph above depicts all tendencies and changes, which have been described above. Thus, there is clear evidence that Pandora's position has deteriorated significantly during last 2 years.
Such performance was completely inconsistent with expectations of Pandora's performance. According to Jyske Bank analysts, who valued and analyzed Pandora's condition in 2010 for its IPO, the expected sales growth of Pandora was approximately 45% in 2011, reaching the level of DKK 9 033 million. In reality, as table 4.2 shows, it turned to be much lower number, namely only DKK 6 658 million, that corresponded to -0,12% decrease of sales.
Table 4.2
Real (R) vs. estimated (E) values of Pandora's sales growth
prior IPO
after IPO
2010E
2010R
2011E
2011R
Sales growth
80%
93%
45%
-0,12%
Source: based on information from Pandora's company reports; Jyske Bank report on Pandora IPOSales
6230
6666
9033
6658
Certainly, such mismanagement decisions and financial performance deterioration have found a reflection in company's position on stock exchange. To capture this, let's look at the graph 4.2, representing the Pandora's share price changes in comparison to OMX Nordic 40 (OMXN40), which is the regional benchmark index, comprising the 40 largest companies whose shares are traded on the stock exchanges in Copenhagen, Helsinki, Stockholm and Reykjavik. Such index was chosen to better understand the surrounding business environment of Pandora, which, as should be reminded, is the Danish company.
Source: http://quotes.wsj.com
Figure 4.2. Share price changes of Pandora A/S (PNDORA:Copenhagen) in comparison to OMX Nordic 40 index (XX:OMXN40), 05.10.2010 - 11.12.2012
According to the above placed graph, Pandora A/S was initially outperforming its benchmark level, constantly showing the increase in its stock price. However, after the first quarter of 2011 situation has reversed and till now Pandora's share price is falling, supported by the fact that firm lost more than 50% of its value. The snapshot of current stock indicators of Pandora A/S is given below in table 4.3 (data as of 11th of December, 2012).
Table 4.3
Pandora A/S (PNDORA) Snapshot (11.12.12)
Source: Reuters
Table 4.3 gives a view of how share price has been fluctuating during last year, from the lowest value of DKK 48,38 on 15.12.2011 to the highest value of DKK 131,80 (10.12.12). Also, we are able to analyze the changes in company's market capitalization. From its initial level (on 5th of October, 2010) market capitalization has dropped considerably, namely by more than 38% (from DKK 27,33 billion, as shown in table 3.2, to DKK 16,80 billion, as shown in table above). Regarding share price, it has also declined drastically. Thus, initial offering price, as repeatedly has been said, was at DKK 210, while current Pandora's stock price (as of 10th of December, 2012) is DKK 127,2. This implies that Pandora is now selling its shares at price, lower by almost 40% of its initial offering.
To understand better why such drastic drops in company's share value occurred, more detailed analysis on company's stock price should be conducted. Figure 4.3 represents Pandora's stock price (in DKK) since IPO, as well as points out the most significant changes in company's share price.
Source: www.reuters.com/finance/stocks C:\Users\Ðлинка\ALINA\навчаннÑ\AAA POLSKA\2nd YEAR\kurnicki\share price.png
Figure 4.3. Share price of Pandora A/S (PNDORA:Copenhagen), DKK, 05.10.2010 - 11.12.2012
Looking at the chart above, the few most important changes in Pandora's stock price can be discovered. Thus, the first important date was 19th of May, 2011 (denominated as point A on the graph). That date stock price of Pandora fell by 22%, from DKK 254 to DKK 199, when Pandora's first-quаrter sales missed all estimates, combined with eurozone crisis weakness. The second shock (point B on the graph), the most drastic for Pandora A/S, after which it can't resile till now, was 2nd of August, 2011, when company published its full-year forecast, significantly cut in comparison to shareholders' expectations. Thus, second quarter EBITDA fell to DKK 440 million, while more than DKK 611 million was expected. It cost company a tremendous loss in its value - almost 2/3. The previous day Pandora's share price was DKK 147,2, while on 2nd of August it has dropped by 65% to DKK 51. Pandora A/S found its CEO, Mr. Mikkel Vendelin Olesen guilty for this financial position deterioration. He was accused of mismanaging the company, setting to high prices for final goods, which caused a drop in company's revenues. As a result, Mr. Olesen has resigned.
The two recent changes in Pandora's stock price are presented by points C and D. In January 2012, the meeting of EU leaders was held, increasing shareholders confidence in ability of conduction eurozone sovereign debt crisis. This reflected all EU stock exchange market, raising the share prices to certain extent. The same tendency was typical for Pandora A/S as well, but didn't last long. In February, 2012 Pandora's share price declined from DKK 97 to DKK 72, when company struggled to sell their inventories (bracelets and charms in stock).
So, as can be concluded from all abovementioned, the main factor that caused all drops in Pandora's share prices was company's inability to meet investors' expectations. Table 4.4 gives a comparison of estimated and actual levels of two main indicators - sales and earnings per share - for the last 5 quarter periods.
Table 4.4
Comparison of sales and earnings per share estimated and actual levels, DKK
Estimates vs. Actual
Estimate
Actual
Difference
Surprise %
SALES (in millions)
Q3 (Sept) 2012
1570,17
1794,00
223,83
14,26
Q2 (June) 2012
1163,80
1260,00
96,20
8,27
Q1 (Mar) 2012
1492,71
1424,00
-68,71
4,60
Q4 (Dec) 2011
2002,00
1952,00
-50,00
2,50
Q3 (Sept) 2011
1518,40
1569,00
50,60
3,33
Earnings (per share)
Q3 (Sept) 2012
1,98
2,90
0,92
46,22
Q2 (June) 2012
1,15
0,50
-0,65
56,67
Q1 (Mar) 2012
1,54
2,60
1,06
68,64
Q4 (Dec) 2011
2,88
4,00
1,12
38,89
Source: www.reuters.com/finance/stocks Q3 (Sept) 2011
2,33
3,00
0,67
28,53
Thus, information, presented above proves our findings on that company failed to reach estimated levels of these indicators. However, it should be stated, that currently, namely last quarter Pandora Company has shown very good results. According to the table 4.4, as well as it can be seen in graph 4.4, Pandora earned DKK 2,9 per share, while only DKK 1,98 was expected.
Source: www.reuters.com/finance/stocks C:\Users\Ðлинка\ALINA\навчаннÑ\AAA POLSKA\2nd YEAR\kurnicki\real vs est.png
Figure 4.4. Actual vs. estimated earnings per share of Pandora A/S, DKK
Hence, Pandora's sales reached the level of DKK 1 794 million, whereas the estimated value was much lower - only DKK 1 570 million. This mainly facilitated an increase of Pandora's share price, which occurred on 6th of November in 2012, when company published its 3rd quarter results. This positive change is depicted as point D on the figure 4.3. Also it is more visible seen on the graph 4.5 below, showing last 3-months performance of Pandora's share price.
Source: Bloomberg Businessweek
Figure 4.5. Share price of Pandora A/S (PNDORA:Copenhagen), DKK, last 3 months
So, if to analyze the current situation of Pandora A/S, the small positive changes should be mentioned, after company showed better-than-expected results during 3rd quarter of 2012. The next important date, for which a lot of investors are waiting for, is 18th of February in 2013, when Pandora A/S is going to disclose its annual 2012 report, together with 4th quarter of year 2012 results. That will be an important issue, which can determine the behaviour of investors, namely whether to buy or to sell shares of Pandora. Currently, the recommendation for investors is rather to hold Pandora's shares, rather than buy them. If company meet the expectations, its shares will be recommended for buying, implying that higher demand will cause the higher stock prices, what is the desirable situation for Pandora.
Summary
The initial public offering (IPO) is the first time company offers for selling their stock to the public, moving therefore from private to public ownership. The IPO requires very detailed and careful planning of all its stages, as on this largely depends the outcome of the issue.
The Pandora company, specializing in distinctive jewellery, namely bracelets and charms, was established in 1982 in Copenhagen, Denmark. But nowadays it operates in more than 65 countries, where almost 1000 Pandora exclusive jewellery stores are presented. Pandora's managers have decided that company will go public in 2010.
The IPO process of Pandora was planned and organized in the smallest details. Thus, the group of investment funds and banks were chosen as Pandora's underwriters, among which were Goldman Sachs International, J. P. Morgan Securities Ltd., Morgan Stanley and Co. International. Pandora signed a firm commitment agreement with its underwriters, with an option of the overallotment.
One of the most important stages of IPO was due diligence, during which the company's valuation was conducted. Jyske Bank was responsible for valuing Pandora, for which it used DCF technique. The outcome of analysis showed very good growth prospects of Pandora.
All significant information, as well as whole disclosure of company's business operations, risks, advantages and disadvantages, was presented in Pandora's prospectus, published on 20th of September, 2010. This document among others specified the range of Pandora's stock price - DKK 175-225 - set by open-price bookbuilding method.
On 23rd of September, 2010, the final offering price was set at level of DKK 210. The total number of offer shares was 47 409 927 (with "greenshoe" option - 54 092 844).
The first day of trade, which was the 5th of October, 2010, was a tremendous success for Pandora, as its share price increased in value by 25%, reaching the level of DKK 263. On the one hand, that is the evidence of high demand on shares, which is the positive sign for company. Thus, such high demand made Pandora's underwriters to exercise the "greenshoe" option on 8th of October. But on the other hand, this can be treated as initial underpricing of company's shares, which led to DKK 2,513 billion "left on the table".
Unfortunately, the further results of Pandora A/S and its performance were completely unsatisfactory. Company, because of mismanagement and wrong pricing policy, was unable to meet its revenues and profit expectations, which greatly reflected Pandora's share price. Thus, the biggest shock was evidenced on 2nd of August, 2011, when Pandora lost 65% of its market value.
Till now company can't fully recover after such deterioration in 2011. Its current stock price is almost by 40% below of its initial offering price. Nevertheless, some positive changes were noticed in 3rd quarter of 2012, when company outperformed its investors' expectations.
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