PETROVIETNAM FINANCE

CORPORATION

INDIVIDUAL ASSIGNMENT
FIN303









DISCUSS THE IPO OF A
COMPANY PUBLIC

















NAME : TRAN VIET DUC
ID STUDENT: SB01197



I. INTRODUCTION



1. Definition Initial Public Offering (IPO)
- An IPO is short for an initial public offering. Like the name says, it's when a company initially offers
shares of stocks to the public. This is also known as going public. An IPO is the first time the owners
of the company give up part of that ownership to stockholders.
- The first time mobilize a wide working capital by issuing stocks common
- Corporate or company have only once IPO

2. Advantages of an IPO for the Company
The IPO is an exciting time for a company because it means it has become successful enough to
require much more capital to continue to grow. It's often the only way for the company to get enough
cash to fund a huge expansion. For the owners, it's finally time to cash in on all their hard work. They
usually award themselves a large percentage of the stock, and so stand to make millions the day it
goes public.
The IPO may also allow the company to attract top talent because they can offer stock options. They
can pay these early executives little or no wages with the promise they can cash out with the IPO.

3. Disadvantages of an IPO for the company
- The IPO process requires a great deal of work. This can distract the company leaders from their
business, which can hurt profits. They also must hire an investment bank, this is very expensive.
- The business owners may not be able to take many shares for themselves.
- They could lose ownership control of their business
- A public company faces much more intense scrutiny and regulations from the SEC, the Sarbanes-
Oxley Act and shareholders

4. The process of Initial Public Offering (IPO)

Step 1: Prepare auction
- Agency decided the equitization / the Steering Committee identified the equitization prices
starting at of auctioned shares.
- Information disclosure of corporate organization auction prepared at least 20 days before the
auction.
- To coordinate with agencies auction for corporate presentations for investors

Step 2: Implement auctions
- Agencies auction proceed subscription receipt and deposit of institutional investors in the
auction.
- The investor vote to attend the auction in the form: Vote corporate directly, Vote directly
intermediary financial institution, Vote directly at the Center Stock exchange and the designated
agents, Vote by mail due to agency regulations auction.

Step 3: Organize identified auctioned and actions result
- The agencies auctioned will conduct the procedure participate removal auctioned shares
and complete information on the auction software
- Identify auction results on the principles of selection, purchase prices from high to low until
a sufficient number of shares offered. At the lowest bid price, in the case of investors put
together the same rates, but the total number of shares is less than the total number of
shares subscribed, the number of shares purchased by investors determine as follows
The number of shares investor are buying = Number of shares remaining x Number of
shares each investor subscription / Total equity investors subscribed
- Write reports related to the decision of auction agency to send equitization, Steering
equitization, businesses and institutions auctions
- Announcing Auction results and collect money to buy shares.

Step 4: Handling of cases of violation of auction rules
- The handling of violation cases are made under the provisions of auction rules.
- Investors do not receive the deposit if the auction rules violation.

Step 5: Handling the shares are not sold in the auction
- If the number of shares, investors refuse to buy less than 30% of the total number of shares
offered, the Steering Committee for the implementation continues to selling shares to the
investors attended the auction by the method agreement with prices not less than the
average successful bid price of the auction.
- If the number of shares investors refuse to buy from winning 30% of the total number of
shares offered for sale rise, the Steering Committee consider shares, decided to hold
auction to buy shares declined. Starting price of the auction in second times must lower
than the lowest successful bid price




5. The ways of conduct IPO
- Duct Auction
- Under-writing commitments
- Services with the highest responsibility
- Buy and the reseller.
- Self-release
- Green shoe Method

6. Vietnam market at the time of the IPO
- Vietnams stock market decrease as the mainstream in 2008. After VN Index reached the highest
points on 10/10/2007, almost of blue-chip go down.
- In 2008, VN Index has received much negative information from monetary of the state.
- On 25/03/2008 VN-Index closed at 496.64 points, down bottom 500. The SSC decided to adjust
fluctuation in the price of shares and fund certificates HOSE from + -5%) to -1%, HASTC from + -
10% to + -2%. The narrow trading band begin implementation date 27/03/2008 .
- SSC had a undertakings stretch IPOs in 2007 to investors have the opportunity to arrange
investment capital until 2008, then this can be considered as a year of IPO with a lot of big IPO plan
laid out in 2007 as: Corporation-Beer-Alcohol Beverages Saigon - SABECO; General Company Beer-
Alcohol-Beverage Hanoi - HABECO. Next SABECO, HABECO a series of other giants plan to IPO in
2008 as Mobiphone, VinaPhone, especially in the field as ICB bank, Agribank, BIDV ...
- Crisis financial world has a significant impact on Vietnam. If in 2006 and 2007, the market grew hot
(market boom), the IPO very favorable, whereas most firms was successful in IPO, into 2008, the
OTC market frozed, it make IPO plans do not happen such as desiring of planners, despite the quality
of the IPO shares was pretty good. Sentiment of investors was not favored commodity IPO and there
was minimum activity in the stock market.












II. SUMMARIZE THE COMPANY SITUATION BEFORE THE IPO


1. Reason for going to public of PetroVietnam Finance Corporation (PVFC)
Once a company is listed, it is able to issue additional common shares in a number of different ways,
one of which is the follow-on offering. This method provides capital for various corporate purposes
through the issuance of equity (see stock dilution) without incurring any debt. This ability to quickly
raise potentially large amounts of capital from the marketplace is a key reason many companies seek
to go public.
PVFC is an organized non-bank credit, is a member of the Vietnam Oil and Gas Corporation, was
born to meet the financial needs of corporations and companies in the industry. With the support of
the national oil company of Vietnam, in the 7 years of presence on the market, PVF has become one
of the most successful businesses.
Before IPO, the financial markets of Vietnam have 4 state banks, 41 joint-stock commercial banks, 5
joint-venture banks and 33 branches of 28 foreign banks, 9 big financial firms. PVFCs total asset
which is 5,000 billion VND is the largest financial companies in the market. Due to large capital
operation capability and the ability to expand the branch network is enhanced.
On 19/10/2007, PVFC organization auctioned 59,638,900 shares. The average auction price
69.974 VND / shares.
By the end of 2007, the total value of the property is more than 47,000 PVFC billion, up 250%
compared to the end of 2006


Financial indicator of PVFC (million VND)

Target 2007 2008
Capital scale

Charter capital 3,000,000 5,000,000
Total assets 47,993,166 43,893,925
Safety capital rate (%) 26.2 23.3
Business performance
Capital mobilization balance 42,517,102 36,770,282
Loan balance 10,133,700 20.989,021
Overdue debt 413,010 970,123
Bad debt 300,798 566,972
Cost of capital ratio
After-tax profit 23% 7.9%
After-tax profit/total assets 1.4% 0.73%
Liquidity target
Immediate liquidity (time) 1.62 1.62
General liquidity (%) 18 50.63


An IPO accords several benefits to the previously private company:
- Enlarging and diversifying equity base
- Enabling cheaper access to capital
- Increasing exposure, prestige, and public image
- Attracting and retaining better management and employees through liquid equity participation
- Facilitating acquisitions (potentially in return for shares of stock)
- Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.

2. The pros of having an IPO at time
On 19/10 / 2007, the Petroleum Finance Company (PVFC) was auctioned IPO shares ( IPO ) on 59.6
million shares to the public . The reason for the company to make decisions such IPO, by standing in
front of these conditions extremely favorable that Vietnam's stock market in 2007 brought the time .
The next section, a general comment on the market before October 2007
The first, the securities market is expansion. The objective of the State until 2010, the market
capitalization of securities accounted for 35 % of GDP. But this year alone, the total value of the
market capitalization (both HOSE and HASTC, excluding bond) has reached more than 43 % of GDP.
In late 2006, only about 1,000 accounts of foreign investors this year, the figure rose to 7,000. The
total amount that foreign investors put $ 3 billion market, but if you count the amount of money to
spend for the IPO "in crisis" is at about 7-10 billion dollars. Foreign Investors call Vietnam a "second
China" in Asia and is considered a bright spot for investors.
The second, the rapid growth of the market. Compared with 2006, the hot growth market, stock prices
increase, then in 2007 the price of the stock has become reasonable. This is extremely important
because if prices rise on hot, easy to fall in market growth bubble phenomenon.
Finally, liquidity is unprecedented levels, the number of investor accounts and transactions increase
the value each session
Therefore, to facilitate the expansion of the stock market in Vietnam during that time, the IPO
companies perform perfectly reasonable and before having extremely favorable buying power of
investors. The growth of the market is perfectly reasonable and safe also cause IPO firms.

3. The cons of having an IPO at time
However, besides the advantages of the stock market at the time of IPO offer. The company also
faces obstacles that a then nascent market brings.
The first, the market still faces the problem of information transparency, conflicts of interest between
management agencies, issuers with minority investors. Specifically, this year is a year of "exploding"
the violations in the securities field, and the penalty is not a deterrent enough.
The second, throughout the year, unexpected fluctuations in the market make both technical analysis
and fundamental analysis are not exactly predictable. It is worth mentioning that even if the listed
companies doing well, the financial targets are achieved but exceeded the stock price is still down.
The third, due to the erratic fluctuations of the market has made investors more mature, helping the
company to IPO can be selected potential investors fully aware. Its a result of many investor
significant changes from the first surf spot to long-term investment. Therefore, this challenge has
turned to the company IPO.
Finally, under the impact of the world economic situation worsened. Business situation of enterprises
will face many difficulties. The foreign company may have to restructure the investment plan in
Vietnam to create more space in which the market fell quiet.

4. The investor of PVFC
The investor of PVFC is Saigon Securities Joint Stock Company (SSI). SSI is the winner when having
two rewards: The best investment bank and The best broker. Although the stock market in
Vietnam is downing but SSI still is leader and breakthrough competitors. It helped firms raise about
6.700 billion VND in the short time (one year). The most important in SSI has good background and
trustworthy.
To support for PVFC, SSI has consulted for PVFC about risks what effect to IPO like interest rate,
credit, investment activities, liquidity, law and others. In addition, it also consults about finance and
the way to hold stock list.
The most important work of SSI is analysis the position and operating of PVFC in the market .After
that SSI will identify the level of price for per stock and at the this price PVFC can sell all of stock.
Furthermore, SSI will support approval process approach potential investors, develop a list of
investors and facilitate access to potential investors.

5. Response of market to PVFC IPO
With issue IPO of PVFC, Market has reacted quite positively. The first is PVFC is a subsidiary of
Petro Vietnam Corporation so market of quite PVFC stable. Base on that PVFC issue IPO debut, it
quite attracted investors at a price of 51000 VND per stock. However, at this time stock market began
to decline so investors starting slow down, do not invest too much and massive as before.

III. CONCLUSION

IPO attracted many investors by PVFC really "giant" in the non-bank financial institutions with
capital after equitization expected up to 5.000 billion VND. The price starts at 51,000 VND / share
is considered quite attractive in terms of stock market.
The reason of PVFC IPO was successful:
- The advantage of corporate:
Strong point attractive for PVFC shares in that company is a member of Vietnam Oil and Gas
Group (Petro Vietnam). According to Dinh La Thang The president of the broad of Director of
Petro Vietnam, PVFC is defined as the financial backbone of the financial system, banking,
securities, insurance corporate. The power of PVFC also have the power of Petro Vietnam.
With this particular advantage, PVFC market is very stable. Since 2000-2006, PVFC arranger
for many of the industry's major projects with a total value of up to 10,000 billion VND.
According to financial data from 2002 - 2006, the revenue and profit of PVFC consistently
achieved high growth rates. In 2007, PVFC estimate was 3.000 billion VND, nearly 3 times
compared with the results of 2006, pre-tax profit reached 703 billion VND, an increase of 5.6
times. However, private first nine months of 2007, PVFC revenue reached 2,003 billion VND
and profit before tax was 631 billion.

- The PVFC was IPO at the right time:
With scale and advantages of PVFC, the starting price of 51,000 VND / share a lot of investors
considered attractive. Mr Nguyen Tien Dung - PVFCs chairman of the board said that this is
the price to be determined long before the time of the market is not as good as now. For
investors in the stock market, the name PVFC totally unfamiliar. We can say, wave stock in
late 2006 and early 2007 related to starting PVFC, many investors participate at this stage if
the employee is not affiliated with PVFC well. That's what makes individual investors to
participate in technological proxies PVFC auction with positive momentum. On the other hand,
the PVFC each financial institution is unique, and so far still the backbone of this system of
Petro Vietnam, will be extremely important to ensure attractive to investors.
Founded by decision dated 30/03/2000 by the Minister 04/2000/QD-VPCP Chairman government
office sign, PetroVietnam Finance Company (PVFC) has been operating under license from
01/12/2000 12/GP-NHNN Governor of the State Bank. Oil and Gas Company's financial institution
authorized financial performance of the Petroleum Corporation (now National Petroleum Corporation)
for payment, arranger, financial investment and investment management. In 5 years, Petro Vietnam
Finance capital has increased from 100 billion to 3,000 billion (from 2002 to 2007)

Reference:
- Text book: David Kidwell and Robert Parrino (2009) Fundamentals of Corporate Finanace.
- Http://cophieu68.vn
- Http://morningstar.com
- http://vneconomy.vn
CONTENTS

I. INTRODUCTION:
1. Definition initial public offering (IPO)
2. Advantages of an IPO for the company
3. Disadvantage of an IPO for the company
4. The process of IPO
5. The ways of conduct IPO
6. Vietnam market at the time of the IPO

II. SUMMARIZE THE COMPANY SITUATION BEFORE THE IPO
1. Reason for going to public of PetroVietnam Finance Corporate
2. The pros of having an IPO
3. The cons of having an IPO
4. The investor of PVFC
5. Response of market to PVFC IPO

III. CONCLUSION
1. The reason of PVFC IPO was successful
2. Conclusion
3. Reference