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Strategic Corporate Finance - Initial public offerings

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What type of IPO should Avaya use - a traditional IPO or an online auction?

Based on your analysis and findings, what would you recommend to the executives of Avaya corporation?

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Solution Summary

Analyses the Initial Public Offering structure of Avaya. Explores benefits and costs of both traditional brokered IPO, as well as an online auction-style IPO. References included.

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Start with some background on IPO types... consider intangible benefits/risks of auction-style IPOs as compared to a traditionally brokered IPO:

The competing model for an IPO is best represented by Google or, more recently, Morningstar. Morningstar went public through an auction-style offering in May 2005-the shares rose over 8% on the day, raising $141 million for the underwriting bank (Anonymous, 2005). Assuming that the auction-style offering fueled at least a portion of that intraday growth, it was a great idea for Morningstar to shun the traditional IPO and follow Google's lead. In the weeks to follow, Morningstar officials' secondary offerings certainly benefited from the boost in demand provided by allowing ...

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