Info: Indian Business Process, equities, & shares

Discussion in 'CAT / MBA INDIA Forum' started by harpreet singh, Nov 27, 2005.

  1. Info abt Indian Business Process,equities,shares

    India Business-FAQ's.

    1. BUSINESS ORGANIZATIONS.
    2. EXPORTING.
    2a. Agents and Distributors/Importers.
    2b. Import Restrictions.
    2c. Import Duties.
    2d. Documentation.
    3. COMMERCIAL POLICIES.
    3a. Free-Trade Zones.
    3b. Exchange Controls.
    4. FOREIGN INVESTMENT.
    4a. Incentives.
    5. INTELLECTUAL PROPERTY RIGHTS.
    5a. Patents.
    5b. Trademarks.
    5c. Copyrights.
    6. TAXATION.
    6a. Corporate Taxes.
    6b. Personal Income Taxes.
    6c. Other Taxes.
    7. REGULATORY AGENCIES.
    8. USEFUL CONTACT.

    1. BUSINESS ORGANIZATIONS.

    The most common business entity used by foreign investors in India is the locally incorporated company. Branches, sole proprietorships and partnerships are essentially closed to foreign companies. Foreign investors may participate in either public or private companies. Private companies must restrict the transfer of their shares, limit the number of shareholders to 50 and prohibit any invitation to the public to subscribe for shares.

    Public companies are those with more than 25 percent of their shares publicly owned; those that own more than 25 percent of the equity of a public company; those with a turnover of more than Rs 100 million in any one year.

    Public and private companies must register the memorandum and articles of association with a state registrar of companies.

    Foreign corporations may interact with Indian businesses in three other ways. The most common form of interaction is the licensing of technology, where no equity capital is involved. The foreign firm can sell its technology for a lump-sum payment and royalties based on sales. The second form of cooperation involves the direct purchase of designs and drawings. These forms of interaction are especially popular with the Indian government. They satisfy government policies designed to increase the amount of technology flow into the Indian economy. The third form of collaboration is joint venture arrangements which account for 15 to 20 percent of all foreign collaboration approved by the Indian government. The foreign firm may receive lump-sum and royalty payments for technology transfer as well as dividends.

    Representative or liaison offices may be opened in India with approval by the Reserve Bank of India. These offices cannot accept orders or sign contracts and no profits can be generated by this type of office. Branch office activities in India may result in legal liability being imposed directly on foreign home offices for business activities in India. Franchising arrangements in India are very rare.
    Index

    2. EXPORTING.
    2a. Agents and Distributors/Importers.
    Agent-principal relations are governed by sections 182 to 238 of the India Contract Act. The types of commercial agents recognized under Indian law are brokers, auctioneers, del credere agents, and insurance agents.

    Premature revocation or termination of an agreement by the principal without just cause requires that compensation be paid to the agent. Agent-principal relations may be terminated prematurely if the agent is guilty of misconduct in the discharge of duties. Depending on the agent-principal contract, the agreement may be terminated upon: expiration of the contract term; death or incapacity of the agent; death or incapacity of the principal; completion of the business; impossibility of execution by reason of law or destruction of the subject matter.

    Companies choosing an agent for the Indian market should make sure that the agent has an office, or is located in Delhi. This will increase the chance that they receive up-to-date notice of policy changes and government procurement notices. The agent should be the main distributor since Indian law does not permit foreign companies to have marketing subsidiaries in India. The exclusive agency agreement is the most common type of agreement in India.
    Index

    2b. Import Restrictions.
    India's import licensing policy was designed to conserve foreign exchange and promote import substitution, but has been relaxed for the current five-year period. Under a new Import-Export Policy announced April 1, 1992, and effective for five years, most goods have become freely importable, no longer requiring import licenses. A sharply curtailed negative list remains in effect which: bans three items outright; bans all consumer items and computers valued at less the Rs 150,000 (US$ 5,000); restricts 68 items and reserves eight products for import by public sector trading companies. The revised policy has also abolished requirements that all goods be imported by the end-user, allowing imports for stock and sale by distributors and wholesalers.

    Indian import controls still apply to some industrial items and most consumer goods. As a result, companies interested in the Indian market should become familiar with the licenses or other controls necessary for the import of their particular products.
    Index

    2c. Import Duties.
    Import duties are applied to almost all goods entering India. The tariff system is based on the Harmonized System (HS) with most tariffs being charged on an ad valorem basis. Tariffs are in the 40 to 60 percent range for basic raw materials, 60 to 100 percent for semi-processed goods, and 100 percent and above on finished and consumer goods. Luxury items can be taxed at rates up to 110 percent. Companies should check import duties for their particular product because rates are product specific.

    2d. Documentation.
    Shipments to India require a commercial invoice, a packing list and bill of lading. A certificate of origin is not required on imports originating in the United States.
    Index


    . COMMERCIAL POLICIES

    a. Free-Trade Zones.
    India has six export processing zones. These facilities provide duty exemptions under certain conditions for the manufacture of export items. The zones are the Kandla Free-Trade Zone in Gujarat, the Santa Cruz Electronics Export Processing Zone (SEEPZ) in Bombay, the Madras EPZ in Madra, the Falta EPZ in West Bengal, the Cochin EPZ in Kerala and the New Okhla Industrial Development Area (NOIDA) EPZ.
    Index

    . Exchange Controls.
    The Reserve Bank of India (RBI) administers India's extensive foreign exchange controls and regulations. All foreign exchange transactions are subject to the control and approval of the RBI, including the transfer of profits and dividends. Controls on outflows of foreign funds are stringent due to India's foreign exchange shortage. The Indian government provides no guarantees against inconvertibility. Companies with 40 percent or more foreign equity are subject to certain provisions of the Foreign Exchange Regulations Act.

    Regulations governing the remittance of dividends state that the foreign currency outflow due to dividends may not exceed export earnings and that automatic approval is granted on preference and equity shares up to certain limits. There are no limitations applied to interest payments on foreign loans although there are limits applied to the repatriation of capital. There is a cap on royalties paid under technology licensing agreements equal to eight percent of export sales or five percent of domestic sales.

    Businesses can consult the Exchange Control Manual of the Reserve Bank of India for all rules and regulations governing India's foreign exchange controls regime.
    Index

    4. FOREIGN INVESTMENT.
    In 1991, the government liberalized the number of industries open to foreign investment, loosened approval requirements and allowed majority foreign equity ownership. There are frequent changes in the regulations governing equity percentage permitted and the industries open to foreign participation. Companies wishing to enter the Indian market should make efforts to obtain the most up- to-date information.

    Foreign investment is encouraged in large-scale projects, projects that will have a favorable impact on the Indian balance of payments position, and investment that will bring new technology to India. The government has designated a list of 34 high-priority industries open to foreign investors.

    Rules and regulations governing foreign investment in India stipulate:

    * All foreign investment projects, not considered a priority
    industry eligible for automatic clearance by the Reserve Bank
    of India, require approval by the Foreign Investment Promotion
    Board or a newly created committee for review of smaller
    investment projects.
    * The government permits foreign firms to hold up to 51 percent
    equity in Indian venture on a case-by-case basis.
    * Automatic approval is granted to foreign investments of up to
    51 percent equity in 34 high-priority industrial sectors.
    * For businesses that solely focus on export-oriented
    manufacturing, 100 percent ownership is available.
    * Foreign companies are permitted to acquire land and own
    buildings as long as permission is obtained from the Reserve
    Bank of India.

    The following restrictions are placed on foreign investment: foreign investment in non-priority sectors is generally restricted to 40 percent of common stock; and restrictions on 100 percent foreign ownership may apply, depending on the nature of the business.
    Index

    4a. Incentives.
    No specific tax incentives exist to attract foreign investment. However, there are incentives available to Indian companies with some share of foreign ownership. Tax and non-tax incentives may be granted to businesses that will increase Indian exports. For example:

    * Tax depreciation allowances and investment allowances for
    various businesses and tax holidays for projects undertaken in
    specified underdeveloped areas.
    * Tax deductions during the first 10 years of operation for new
    industrial undertakings established anywhere in India. These
    deductions apply to the hotel and shipping industries.
    * Under certain conditions, 100 percent export-oriented projects
    are exempt from taxation.
    * Soft loans and concessional credits are available to specified
    industries.
    * Five-year tax holiday for industrial undertakings in free
    trade and export processing zones. Exemption from licensing
    regulations, excise taxes, customs duties, and sales tax are
    also available to businesses operating in these areas.
    * Businesses that manufacture and process goods for export are
    eligible for customs and excise duty drawbacks. These
    drawback schemes also apply to raw materials.

    Some non-tax incentives are offered by the state governments. Examples of these include the availability of land on concessional terms, facilities for business use, and water and power at reduced rates.
    Index

    5. INTELLECTUAL PROPERTY RIGHTS.
    5a. Patents.
    Patents in India are protected under the Patent Act of 1970. The Act protects foreign companies on the same basis as Indian nationals as long as there is reciprocity of protection. An invention must be original, be the result of ingenuity, and have utility. India's Patent Act grants patent protection for 14 years from the date of filing. Stringent compulsory licensing provisions have the potential to render patent protection virtually meaningless. India's Patent Act prohibits patents for any invention intended or capable of being used as a food, drug or relating to substances prepared or produced by chemical processes. The process by which drugs, foods and related items are produced is patentable, but the patent term for these processes is limited to the shorter of five years from the grant of patent or seven years from patent application filing.
    Index

    5b. Trademarks.
    Trademarks are protected under The Trade and Merchandise Marks Act of 1958 which establishes the rights for the first user of the trademark. Trademarks are registered for seven years with renewal of the registration allowed for an additional seven-year period. Permission from the Reserve Bank of India must be obtained by foreign or Indian companies with 40 percent or more non-resident interest to use a trademark.
    Index

    5c. Copyrights.
    India is a member of the Universal Copyright Convention and the Berne Convention for the Protection of Literary and Artistic Works. The Copyright Act 1957 provides protection during the author's life, plus 50 years after death.
    Index

    6. TAXATION.
    6a. Corporate Taxes.
    Indian corporate tax rates are high and the pertinent laws complex. The standard corporate income tax rates are 45 percent for public companies, 65 percent for branches of foreign companies and 50 percent for all other companies. If companies utilize tax incentives available to them, the typical rates vary between 30 and 50 percent. The tax rates are lowest for widely held companies incorporated in India. Companies are strongly encouraged to employ a tax specialist familiar with the Indian tax structure. A 25 percent tax is levied on dividends paid to non-resident corporate bodies, with a minimum 30 percent tax being applied if the non-resident is not a corporation. Interest is taxed at a rate of 25 percent, with a 3.125 percent surcharge. Royalties are taxed at a rate of 30 percent.

    6b. Personal Income Taxes.
    A resident of India is considered to be an individual who spends at least 183 days in India during a given year. Residents are taxed on a progressive sale ranging from 20 to 30 percent on their worldwide income. Non-residents are taxed only on the income arising from sources within India.

    6c. Other Taxes.
    There is a five percent sales tax applicable to most goods along with excise taxes on alcohol, drugs, automobiles, cosmetics, cigarettes and air conditioners. States also levy sales taxes ranging from four to 10 percent. A number of luxury, real estate and other taxes may also apply.

    Tax Treaties:
    The United States and India have signed a treaty to avoid double taxation.
    Index

    7. REGULATORY AGENCIES.
    The Office of the Chief Controller of Imports and Exports (CCI&;E) in the Ministry of Commerce issues import licenses.
    Index


    : Stocks - Basics


    Perhaps we should start by looking at the basics: What is stock? Why does a company issue stock? Why do investors pay good money for little pieces of paper called stock certificates? What do investors look for? What about Value Line ratings and what about dividends?

    To start with, if a company wants to raise capital (money), one of its options is to issue stock. A company has other methods, such as issuing bonds and getting a loan from the bank. But stock raises capital without creating debt; i.e., without creating a legal obligation to repay borrowed funds.

    What do the buyers of the stock -- the new owners of the company -- expect for their investment? The popular answer, the answer many people would give is: they expect to make lots of money, they expect other people to pay them more than they paid themselves. Well, that doesn't just happen randomly or by chance (well, maybe sometimes it does, who knows?).

    The less popular, less simple answer is: shareholders -- the company's owners -- expect their investment to earn more, for the company, than other forms of investment. If that happens, if the return on investment is high, the price tends to increase. Why?

    Who really knows? But it is true that within an industry the Price/Earnings (i.e., P/E) ratio tends to stay within a narrow range over any reasonable period of time -- measured in months or a year or so.

    So if the earnings go up, the price goes up. And investors look for companies whose earnings are likely to go up. How much?

    There's a number -- the accountants call it Shareholder Equity -- that in some magical sense represents the amount of money the investors have invested in the company. I say magical because while it translates to (Assets - Liabilities) there is often a lot of accounting trickery that goes into determining Assets and Liabilities.

    But looking at Shareholder Equity, (and dividing that by the number of shares held to get the book value per share) if a company is able to earn, say, $1.50 on a stock whose book value is $10, that's a 15% return. That's actually a good return these days, much better than you can get in a bank or C/D or Treasury bond, and so people might be more encouraged to buy, while sellers are anxious to hold on. So the price might be bid up to the point where sellers might be persuaded to sell.

    A measure that is also sometimes used to assess the price is the Price/Book (i.e., P/B) ratio. This is just the stock price at a particular time divided by the book value.

    What about dividends? Dividends are certainly more tangible income than potential earnings increases and stock price increases, so what does it mean when a dividend is non-existent or very low? And what do people mean when they talk about a stock's yield?

    To begin with the easy question first, the yield is the annual dividend divided by the stock price. For example, if company XYZ is paying $.25 per quarter ($1.00 per year) and XYZ is trading at $10 per share, the yield is 10%.

    A company paying no or low dividends (zero or low yield) is really saying to its investors -- its owners, "We believe we can earn more, and return more value to shareholders by retaining the earnings, by putting that money to work, than by paying it out and not having it to invest in new plant or goods or salaries." And having said that, they are expected to earn a good return on not only their previous equity, but on the increased equity represented by retained earnings.

    So a company whose book value last year was $10 and who retains its entire $1.50 earnings, increases its book value to 11.50 less certain expenses. The $1.50 in earnings represents a 15% return. Let's say that the new book value is 11. To keep up the streak (i.e., to earn a 15% return again), the company must generate earnings of at least $1.65 this year just to keep up with the goal of a 15% return on equity. If the company earns $1.80, the owners have indeed made a good investment, and other investors, seeking to get in on a good thing, bid up the price.

    That's the theory anyway. In spite of that, many investors still buy or sell based on what some commentator says or on announcement of a new product or on the hiring (or resignation) of a key officer, or on general sexiness of the company's products. And that will always happen.

    What is the moral of all this: Look at a company's financials, look at the Value Line and S&P charts and recommendations, and do some homework before buying.

    Do Value Line and S&P take the actual dividend into account when issuing their "Timeliness" and "Safety" ratings? Not exactly. They report it, but their ratings are primarily based on earnings potential, performance in their industry, past history, and a few other factors. (I don't think anyone knows all the other factors. That's why people pay for the ratings.)

    Can a stock broker be relied on to provide well-analyzed, well thought out information and recommendations? Yes and no.

    On the one hand, a stock broker is in business to sell you stock. Would you trust a used-car dealer to carefully analyze the available cars and sell you the best car for the best price? Then why would you trust a broker to do the same?

    On the other hand, there are people who get paid to analyze company financial positions and make carefully thought out recommendations, sometimes to buy or to hold or to sell stock. While many of these folks work in the "research" departments of full-service brokers, some work for Value Line, S&P etc, and have less of an axe to grind. Brokers who rely on this information really do have solid grounding behind their recommendations.

    Probably the best people to listen to are those who make investment decisions for the largest of Mutual Funds, although the investment decisions are often after the fact, and announced 4 times a year.

    An even better source would be those who make investment decisions for the very large pension funds, which have more money invested than most mutual funds. Unfortunately that information is often less available. If you can catch one of these people on CNN for example, that could be interesting.


    Initial Public Offerings (IPOs)



    Introduction to IPOs
    The Mechanics of Stock Offerings
    The Underwriting Process
    IPO's in the Real World
    1. Introduction to IPOs

    When a company whose stock is not publicly traded wants to offer that stock to the general public, it usually asks an "underwriter" to help it do this work. The underwriter is almost always an investment banking company, and the underwriter may put together a syndicate of several investment banking companies and brokers. The underwriter agrees to pay the issuer a certain price for a minimum number of shares, and then must resell those shares to buyers, often clients of the underwriting firm or its commercial brokerage cousin. Each member of the syndicate will agree to resell a certain number of shares. The underwriters charge a fee for their services.

    For example, if BigGlom Corporation (BGC) wants to offer its privately- held stock to the public, it may contact BigBankBrokers (BBB) to handle the underwriting. BGC and BBB may agree that 1 million shares of BGC common will be offered to the public at $10 per share. BBB's fee for this service will be $0.60 per share, so that BGC receives $9,400,000. BBB may ask several other firms to join in a syndicate and to help it market these shares to the public.

    A tentative date will be set, and a preliminary prospectus detailing all sorts of financial and business information will be issued by the issuer, usually with the underwriter's active assistance.

    Usually, terms and conditions of the offer are subject to change up until the issuer and underwriter agree to the final offer. The issuer then releases the stock to the underwriter and the underwriter releases the stock to the public. It is now up to the underwriter to make sure those shares get sold, or else the underwriter is stuck with the shares.

    The issuer and the underwriting syndicate jointly determine the price of a new issue. The approximate price listed in the red herring (the preliminary prospectus - often with words in red letters which say this is preliminary and the price is not yet set) may or may not be close to the final issue price.

    Consider NetManage, NETM which started trading on NASDAQ on Tuesday, 21 Sep 1993. The preliminary prospectus said they expected to release the stock at $9-10 per share. It was released at $16/share and traded two days later at $26+. In this case, there could have been sufficient demand that both the issuer (who would like to set the price as high as possible) and the underwriters (who receive a commission of perhaps 6%, but who also must resell the entire issue) agreed to issue at 16. If it then jumped to 26 on or slightly after opening, both parties underestimated demand. This happens fairly often.

    IPO Stock at the release price is usually not available to most of the public. You could certainly have asked your broker to buy you shares of that stock at market at opening. But it's not easy to get in on the IPO. You need a good relationship with a broker who belongs to the syndicate and can actually get their hands on some of the IPO. Usually that means you need a large account and good business relationship with that brokerage, and you have a broker who has enough influence to get some of that IPO.

    By the way, if you get a cold call from someone who has an IPO and wants to make you rich, my advice is to hang up. That's the sort of IPO that gives IPOs a bad name.

    Even if you that know a stock is to be released within a week, there is no good way to monitor the release without calling the underwriters every day. The underwriters are trying to line up a few large customers to resell the IPO to in advance of the offer, and that could go faster or slower than predicted. Once the IPO goes off, of course, it will start trading and you can get in on the open market.



    2. The Mechanics of Stock Offerings

    The Securities Act of 1933, also known as the Full Disclosure Act, the New Issues Act, the Truth in Securities Act, and the Prospectus Act governs the issue of new issue corporate securities. The Securities Act of 1933 attempts to protect investors by requiring full disclosure of all material information in connection with the offering of new securities. Part of meeting the full disclosure clause of the Act of 1933, requires that corporate issuers must file a registration statement and preliminary prospectus (also know as a red herring) with the SEC. The Registration statement must contain the following information:


    A description of the issuer's business.
    The names and addresses of the key company officers, with salary and a 5 year business history on each.
    The amount of ownership of the key officers.
    The company's capitalization and description of how the proceeds from the offering will be used.
    Any legal proceedings that the company is involved in.
    Once the registration statement and preliminary prospectus are filed with the SEC, a 20 day cooling-off period begins. During the cooling-off period the new issue may be discussed with potential buyers, but the broker is prohibited from sending any materials (including Value Line and S&P sheets) other than the preliminary prospectus.

    Testing receptivity to the new issue is known as gathering "indications of interest." An indication of interest does not obligate or bind the customer to purchase the issue when it becomes available, since all sales are prohibited until the security has cleared registration.

    A final prospectus is issued when the registration statement becomes effective (when the registration statement has cleared). The final prospectus contains all of the information in the preliminary prospectus (plus any amendments), as well as the final price of the issue, and the underwriting spread.

    The clearing of a security for distribution does not indicate that the SEC approves of the issue. The SEC ensures only that all necessary information has been filed, but does not attest to the accuracy of the information, nor does it pass judgment on the investment merit of the issue. Any representation that the SEC has approved of the issue is a violation of federal law.

    3. The Underwriting Process

    The underwriting process begins with the decision of what type of offering the company needs. The company usually consults with an investment banker to determine how best to structure the offering and how it should be distributed.

    Securities are usually offered in either the new issue, or the additional issue market. Initial Public Offerings (IPO's) are issues from companies first going public, while additional issues are from companies that are already publicly traded.

    In addition to the IPO and additional issue offerings, offerings may be further classified as:


    Primary Offerings: Proceeds go to the issuing corporation.
    Secondary Offerings: Proceeds go to a major stockholder who is selling all or part of his/her equity in the corporation.
    Split Offerings: A combination of primary and secondary offerings.
    Shelf Offering: Under SEC Rule 415 - allows the issuer to sell securities over a two year period as the funds are needed.
    The next step in the underwriting process is to form the syndicate (and selling group if needed). Because most new issues are too large for one underwriter to effectively manage, the investment banker, also known as the underwriting manager, invites other investment bankers to participate in a joint distribution of the offering. The group of investment bankers is known as the syndicate. Members of the syndicate usually make a firm commitment to distribute a certain percentage of the entire offering a nd are held financially responsible for any unsold portions. Selling groups of chosen brokerages, are often formed to assist the syndicate members meet their obligations to distribute the new securities. Members of the selling group usually act on a " best efforts" basis and are not financially responsible for any unsold portions.

    Under the most common type of underwriting, firm commitment, the managing underwriter makes a commitment to the issuing corporation to purchase all shares being offered. If part of the new issue goes unsold, any losses are distributed among the members of the syndicate.

    Whenever new shares are issued, there is a spread between what the underwriters buy the stock from the issuing corporation for and the price at which the shares are offered to the public (Public Offering Price, POP). The price paid to the issuer is known as the underwriting proceeds. The spread between the POP and the underwriting proceeds is split into the following components:


    Manager's Fee: Goes to the managing underwriter for negotiating and managing the offering.
    Underwriting Fee: Goes to the managing underwriter and syndicate members for assuming the risk of buying the securities from the issuing corporation.
    Selling Concession - Goes to the managing underwriter, the syndicate members, and to selling group members for placing the securities with investors.
    The underwriting fee us usually distributed to the three groups in the following percentages:


    Manager's Fee 10% - 20% of the spread
    Underwriting Fee 20% - 30% of the spread
    Selling Concession 50% - 60% of the spread
    In most underwritings, the underwriting manager agrees to maintain a secondary market for the newly issued securities. In the case of "hot issues" there is already a demand in the secondary market and no stabilization of the stock price is needed. However many times the managing underwriter will need to stabilize the price to keep it from falling too far below the POP. SEC Rule 10b-7 outlines what steps are considered stabilization and what constitutes market manipulation. The managing underwriter may enter bids (offers to buy) at prices that bear little or no relationship to actual supply and demand, just so as the bid does not exceed the POP. In addition, the underwriter may not enter a stabilizing bid higher than the highest bid of an independent market maker, nor may the underwriter buy stock ahead of an independent market maker.

    Managing underwriters may also discourage selling through the use of a syndicate penalty bid. Although the customer is not penalized, both the broker and the brokerage firm are required to rebate the selling concession back to the syndicate. Many broke rages will further penalize the broker by also requiring that the commission from the sell be rebated back to the brokerage firm.

    4. IPO's in the Real World

    Of course knowing the logistics of how IPO's come to market is all fine and dandy, but the real question is, are they a good investment? That does tend to be a tricky issue. On one hand there are the Boston Chickens and Snapples that shoot up 50% or 100%. But then there is the research by people like Tim Loughran and Jay Ritter that shows that the average return on IPO's issued between 1970 and 1990 is a mere 5% annually.

    How can the two sides of this issue be so far apart? An easy answer is that for every Microsoft, there are many stocks that end up in bankruptcy. But another answer comes from the fact that all the spectacular stories we hear about the IPO market are usually basing the percentage increase from the POP, and the Loughran and Ritter study uses purchase prices based on the day after the offering hit the market.

    For most investors, buying shares of a "hot" IPO at the POP is next to impossible. Starting with the managing underwriter and all the way down to the investor, shares of such attractive new issues are allocated based on preference. Most brokers reserve whatever limited allocation they receive for only their best customers. In fact, the old joke about IPO's is that if you get the number of shares you ask for, give them back, because it means nobody else wants it.

    While the deck may seem stacked against the average investor. For an active trader things may not be as bad as they appear. The Loughram and Ritter study assumed that the IPO was never sold. The study does not take into account an investor who bought an issue like 3DO (THDO - NASDAQ), the day after the IPO and sold it in the low to mid 40's, before it came crashing down. Obviously opportunities exist, however it's not the easy money so often associated with the IPO market

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