Business Valuation and Equity Management When Entering the IPO Market

Abstract

The economic independence of any state is the basis of the welfare of the country's population. Starting from 2011, the Republic of Kazakhstan has been working on the financial stabilization of its core assets by transferring leading national companies to an IPO. Formation and development of the IPO market requires conducting various economic analyses and determining the effectiveness of innovative design solutions involved in this direction. One of such activities is the corporate asset valuation of the enterprise entering the IPO market. As a rule, each asset has its own internal base value, which is estimated depending on the character of cash flows, the rate of their growth and the degree of future risk. As a result of the evaluation, the enterprise will have an idea of the life cycle of the project being invested, a pattern of cash flow will be revealed and a discount rate will be determined in order to determine the present value. At the initial stage of the IPO market formation in Kazakhstan, major national companies with long life cycles possessing a sufficient number of assets were identified as the main participants of the project. To participate in an IPO one should know the basic rules of investment, trade mechanisms and features, as well as the law regulating these issues.

Development of Modern Approaches to Exchange-Traded Financial Asset Evaluation

“…The trends of recent years clearly indicate a shift in interest to unprofitable companies with high development potential in the future. [16] This approach to high valuing of innovative company shares has practically become the norm when they conduct an initial public offering (IPO). In recent years, the acquisition of such securities is extremely weakly correlated with the objectivity of their assessment within the framework of the fundamental approach, and on the first day of trading they almost always grow even with an initially overestimated value (Table 1) These statistics indicate a clear shift in investor interest from a fundamentally sound evaluation of shares in favor of their popularity, the uniqueness of the product and the opinion of financial advisers.…”

Advances in contemporary means to assess exchange-traded financial assets

“…Its primary setback is that it assesses the prevailing position of the organization rather that the future. The tendencies of past years vividly reveal a sharp shift in interest to unprofitable organizations with high growth potential in the near future (Tastulekova et al, 2018).…”