So another week has passed, and I have finally found my research topic. It is going be looking at assessing the effectiveness of comparable firm multiples in valuing Social Media IPOs. The good news is that all of the research that I have done before arriving at my final topic is still completely applicable.
After talking about the Literature Review in class on Friday, I felt soooo much better about what I needed to do: I needed to:
1. Prove that I wasn't any joe schmo in the field
2. Establish what has been done on different areas of my research area
3. Show how my research contributes and answers an essential gap in what has been already been done
Based on these goals and my findings prior to this post, I expect to begin my literature review with a general description of what an IPO is, the importance of an IPO to a firm, and the different stages before the initial offering of an IPO. From this last part, I will begin to introduce anomalies in the IPO process (such as underpricing), which will naturally lead me to discuss the general underperformance of IPO's in the long term, as this is an anomaly that often occurs after the public issuing of a firms stocks. Following this discussion about IPO anomalies, I will discuss whether these things have any explanations, or possible factors which can aid in our understanding of them. From there, I can introduce the concept of firm valuation, and how when we value a company, we connect things that we already know about the company to future expectations we have about the company. This naturally leads into a discussion of what valuation techniques have historically performed the best, and in which scenarios the techniques have not been thoroughly tested in. This would lead me to a discussion of IPOs, and more specifically looking at the Comparable Firm Approach for valuation. From here, I can justify why I need to specifically look at Social Media IPOs, and then begin to pose a research question and reveal a gap in this area.
One Source that is profoundly important in my literature review and my area of inquiry is a source by Piotr Wisniewski. The source discusses Social Media IPOs, assessing the viability of a Social Media firm to conduct an IPO. This source is fundamental to my area of research since it explains much of the uniqueness behind Social Media IPOs, compared to non-technology IPOs and internet, software IPOs as well. For instance, Wisniewski notes how many Social Media IPOs are relatively overpriced as compared to other IPOs in the same industry (something remarkably different due to the general trend of underpricing for IPOs). Additionally, Social Media stocks tend to be relatively overvalued compared to the market and industry average, but unlike most IPOs, also outperform the industry and market average. This provides key insight into the differences between Social Media IPOs as opposed to other IPOs and is essential in establishing the gap in the research for the literature review. As many other sources typically discuss the long-term outlook of underpriced IPOs, as well as the valuation of these IPOs, it will be incredibly fruitful to see if the effectiveness of valuation techniques changes when looking at IPOs that have radically different initial valuations and short-term performance as compared to other IPOs.
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Signing off,
Akash
After talking about the Literature Review in class on Friday, I felt soooo much better about what I needed to do: I needed to:
1. Prove that I wasn't any joe schmo in the field
2. Establish what has been done on different areas of my research area
3. Show how my research contributes and answers an essential gap in what has been already been done
Based on these goals and my findings prior to this post, I expect to begin my literature review with a general description of what an IPO is, the importance of an IPO to a firm, and the different stages before the initial offering of an IPO. From this last part, I will begin to introduce anomalies in the IPO process (such as underpricing), which will naturally lead me to discuss the general underperformance of IPO's in the long term, as this is an anomaly that often occurs after the public issuing of a firms stocks. Following this discussion about IPO anomalies, I will discuss whether these things have any explanations, or possible factors which can aid in our understanding of them. From there, I can introduce the concept of firm valuation, and how when we value a company, we connect things that we already know about the company to future expectations we have about the company. This naturally leads into a discussion of what valuation techniques have historically performed the best, and in which scenarios the techniques have not been thoroughly tested in. This would lead me to a discussion of IPOs, and more specifically looking at the Comparable Firm Approach for valuation. From here, I can justify why I need to specifically look at Social Media IPOs, and then begin to pose a research question and reveal a gap in this area.
One Source that is profoundly important in my literature review and my area of inquiry is a source by Piotr Wisniewski. The source discusses Social Media IPOs, assessing the viability of a Social Media firm to conduct an IPO. This source is fundamental to my area of research since it explains much of the uniqueness behind Social Media IPOs, compared to non-technology IPOs and internet, software IPOs as well. For instance, Wisniewski notes how many Social Media IPOs are relatively overpriced as compared to other IPOs in the same industry (something remarkably different due to the general trend of underpricing for IPOs). Additionally, Social Media stocks tend to be relatively overvalued compared to the market and industry average, but unlike most IPOs, also outperform the industry and market average. This provides key insight into the differences between Social Media IPOs as opposed to other IPOs and is essential in establishing the gap in the research for the literature review. As many other sources typically discuss the long-term outlook of underpriced IPOs, as well as the valuation of these IPOs, it will be incredibly fruitful to see if the effectiveness of valuation techniques changes when looking at IPOs that have radically different initial valuations and short-term performance as compared to other IPOs.
(624)
Signing off,
Akash
Akash, while I appreciate the shout-out, it was your discussion and explanations that got us to your research topic. Take credit, man!
ReplyDeleteI love the direction that you're going here -- I think you have a lot more clarity and focus than you've had in past weeks. I think we're starting to hone in on the level of specificity necessary for your scope.
So that source, did it critique current valuation methods, as it found that they were often overvalued? Or did it just point out that trend? Either way, it makes an interesting case for researching social media IPO valuations. (Did I say all of that right? haha)
your topic is sups cool (i mean i don't really know anything about it but yeah) and i think you will prove to not be a joe shmoe. i think your focus on social media is really interesting and you seem to really know what you’re doing with your lit review - the ideas are all naturally connected. maybe it’s just because you went into a lot of depth with your description of your lit review, but you may be trying to accomplish too much with your lit review and i think you should be careful of that. I'm kind of confused on what exactly the gap is maybe i missed it but is it just short term instead of long term or….also are you only going to focus on one social media outlet bc if so you should find sources on that one thing specifically….sorry if what I'm saying is total garbage bc of misunderstanding what was going on with ur topic lol
ReplyDeleteDUUUUDEE!!!!! I love your topic and it relates strongly to what I did over summer with my OG MAIN MAN MICHAEL GRIMES (i will give you his contact info so you can bug him and his underlings). I am v proud of you for finding a nuanced and interesting topic of research with the realm of IPOs and narrowing down your IPO search to social media IPOs. However, the main issue that I found with your topic is that only one investment banking firm can take a social media company public. Therefore, I am worried about standardization in your results and your methods. Each company such as Facebook or Twitter have a unique set of characteristics and a unique target market segment that they offer their services to. Even though they overlap, the company goals, company features, and compnay futures are all completely different things. For this reason, their IPOs are performed and result in different outcomes. Because only one company, like Morgan Stanley, like Goldman Sachs, can initally offer shares of a social media company to Mutual Funds, Hedge Funds and the general public, it will be impossible to see how different invesment banking ocorporations valued the company had how their valuation would have led to a better IPO (because its not possible to have multiple IPOs). However, some IPOs have mutliple bookrunners (the people that go around asking mutual funds and hedge funds to buy shares). I feel like an interesting area of study is to see how each bookrunner pitches the sale of stocks and do a comparative analysis between companies in that regard. Also, what do you think about focusing on why one IPO (not facebook because everyone talks about facebook) was not successful? With this you can then analyze what could have been done to make it better. For your personal research/primary research, you were originally thinking about making a computerized test or something. Maybe that could apply here!
ReplyDeleteSwaggyV
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