Nestcape IPO Case - Netscape IPO Case study PDF

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Summary

Netscape IPO Case study...

Description

NETSCAPE'S INITIAL PUBLIC OFFERING - Valuation Sheet Assumptions Risk Free Rate Equity Risk Premium Corporate tax rate Ahares outstanding Netscape's cost of equity

Case Questions Since the media firms were among the largest stakes in the company, 11% from page 6, and since their 1 contribution was 18 Million USD, we can conclude that they valued the company at 18M/0.11, being 163,636,363 USD From Exhibit 3, we can extract the following info for Microsoft: Shares outstanding: 627,000; P/E ratio: 39 2 and EPS 2.32. Accordingly the Market Value is: 2.32 x 39 x 627,000 = 56,730,960 USD The principal reasons for going public were to fund expected future growth, to stockpile cash reserves for 3 potential acquisitions, and to gain visibility and credibility within the industry.

6.71% 6.00% 34.00% 33,001 12.00%

Growth rate (trial & error)

52.76%

Income Statement Calculations

1995

1997

1998

1999

2000

2001

2002

2003

2004

Revenues Cost of Sales

17,321 1,801

1996 26,459 2,752

40,417 4,203

61,739 6,421

94,309 9,808

144,062 14,982

220,062 22,886

336,156 34,960

513,495 53,404

784,390 81,577

1,198,194 124,612

Gross Profit Operating Expenses

15,520 14,013

23,707 18,759

36,214 24,614

55,318 31,425

84,501 38,573

129,080 44,515

197,176 45,993

301,196 70,257

460,092 107,321

702,813 163,937

1,073,582 250,423

Operating Income R&D Expenses

1,507 6,374

4,948 9,737

11,600 14,873

23,893 22,720

45,929 34,706

84,565 53,015

151,183 80,983

230,939 123,705

352,771 188,966

538,876 288,655

823,160 440,936

Income before tax Taxes

(4,867) -

(4,789) -

(3,274) -

1,173 -

11,223 -

31,550 10,545

70,200 23,868

107,234 36,459

163,805 55,694

250,220 85,075

382,224 129,956

NET INCOME

(4,867)

(4,789)

(3,274)

1,173

11,223

21,004

46,332

70,774

108,111

165,145

252,268

Cumulative tax loss carry-forward

(4,867)

(9,656)

(12,930)

(11,757)

-

-

-

-

-

2003

2004

1995

1997

1998

1999

2000

2001

Net Income Depreciation Capital Expenditures

(4,867) 953 (7,933)

(4,789) 1,455 (10,575)

(3,274) 2,223 (13,796)

1,173 3,396 (17,472)

11,223 5,187 (21,188)

21,004 7,923 (23,962)

46,332 12,103 (23,767)

70,774 108,111 165,145 18,489 28,242 43,141 (36,305) (55,457) (84,714)

Cash Flow Terminal Value (2005) Disccounting Periods

(11,848)

(13,908)

(14,847)

(12,903)

(4,778)

4,965

34,669

52,958

PV (1995)

(11,848)

IPO Offering Price

1

2

3

(12,418)

(11,836)

(9,184)

4 (3,037)

2002

-

Cash Flow Calculations

-

1996

(534)

80,896

2005

123,573

5

6

7

8

9

2,818

17,564

23,956

32,673

44,562

2005 252,268 65,901 Extrapolation for CAPEX (129,405) 188,764 2,453,926 10 850,875

28.00 Conclusion

Based on the above assumptions and simulating Cash Flows over the next 10 years, Netscape must grow at approximately 52.76% to justify a stock valuation of $28 pe share

5.83%...