Netscape Initial Public offering

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Case 1 – Netscape Initial Public Offering  

Course: Corporate Finance

Date: 09-02-2015

Suzanne Groen                

Nikki Krayenoord                          

Zhenni Hu                        

Juliette van der Werf        6165796

Case Questions

Question 1. Why has Netscape been successful to date? What is its strategy? How risky is its current competitive situation?

Question 2. Value Netscape. Use the following assumptions:

….

Question 3. How fast does Netscape have to grow on an annual basis over the next 10 years to justify the $28 offer price?

Question 4. What sources of capital other than public equity markets could be tapped to satify these capital needs?

Question 5.  What are the advantages and disadvantages of public ownership?

Advantages:

• Cheapter and better access to capital
• More liquidity
• Knowing the market price
• Visibility
• …

Disadvantages:

• Firm must satisfy all of the requirements of public companies (e.g. SEC filings, SOX etc.)
• Lack of ownership
• Sharing profit
• More difficulties monitoring the management, because of equity holders become more widely spread out.
• …

Question 6. Why are many IPOs underpriced?

Reasons for underpricing

Underpricing is attributed to a range of factors:

Information asymmetry between uninformed investors and informed investors

Underwriters seek to control their risk whilst rewarding investors for taking on the risk

Control Theories: underpricing shapes the shareholder base