Fundamental valuation of a company and IPO timing: еhe case of SUEK

Abstract

IPO timing is a very important decision for future issuer. The company aims at receiving the highest possible offer price for its shares. Fundamental valuation is relevant for these purposes, as it is easy in use and allows to predict value for privately-held firms. The goal of the study was to provide integrative approach for IPO timing decisions, which includes analysis of changes of company’s fundamental value, ownership structure, and other essential events in the terms of RF law, with illustrations on SUEK case. Following objectives were achieved over the course of the research: • RIM models based on IFRS (MSFO) data for RTS-traded companies for the period 2007-2014 were estimated • Important steps in the process of preparing for an IPO were isolated and a scheme for optimal IPO timing was developed • Analysis of fundamental value and significant events of privately held Russian company SUEK was conducted, proving the applicability of proposed approach Approach offered as a result of the research allows to determine optimal IPO timing based on the fundamental value of the company, corporate readiness and market conditions. This scheme showed high compliance with real life as the Example of SUEK indicates that the lack of any component can lead to cancellation of planned IPO. One more important finding include that the IFRS-based fundamental model produces results on average closer to actual market capitalization than RAS-based model. The practical applications of the study include easy-to –use approach that can be used in determining IPO timing.