A case study: ‘Prada’s Hong Kong IPO’

The assignment is based on the following documents  ï‚· A case study: ‘Prada’s Hong Kong IPO’  ï‚· Prada IPO prospectus  ï‚· An Excel file containing daily share price of Prada from its IPO to June 2014 (1913.HK shareprice)  ï‚· Prada’s Annual Report 2013  Read the above documents and the IPO book (e-copy available on Blackboard) to answer the following questions. You may wish to use external references/material from credible sources (such as financial press, journal articles):  (i) An IPO marks a strategic milestone for a company.  (a) What may have motivated Prada (Stock code ‘1913’) to go public?  (b) Why do you think Prada chose to list on the Hong Kong Stock Exchange? Were there any downsides of a Hong Kong listing?  (c) Why do you think Prada chose to conduct its IPO in 2011?  (d) What can you say about the primary and secondary shares sold in the Prada IPO? How did Prada plan to use the proceeds of the IPO? (16 marks)  (ii) What is an IPO over-allotment (Greenshoe) option? Describe the over-allotment option included in Prada’s IPO? (7 marks)  (iii) The underwriting investment bank takes on a central role in the IPO process.  (a) What are the key tasks executed by the underwriter?  (b) What are primary considerations when selecting an underwriter?  January 2021 SEMESTER – ASSIGNMENT QUESTIONS  Page 2 of 3  (c) Often, multiple underwriters are involved. In the case of Prada, a syndicate of 4 underwriters was involved in the IPO. What are the main motivations for syndication?  (d) How much compensation was paid to the underwriters of Prada? How does it compare to the average compensation paid to underwriters in US IPOs?  (e) What do you understand by ‘price-stabilization’ activities conducted by the underwriter(s)? Do you think the underwriters were involved in price-stabilization of the Prada IPO? (25 marks)  (iv) Describe what happens during ‘book-building’ of an IPO. What price range was used for book building of the Prada IPO? Why do you think Prada priced its offering at the bottom end of the book-building range? (10 marks)  (v) Without conducting a formal valuation analysis and based on the information given in the case study and the IPO prospectus, discuss the pricing of the Prada IPO. Would you have invested in Prada at this price? (10 marks)  (vi) What are IPO lock-up agreements? Describe the lock-up agreement of the Prada IPO. How was the Prada lockup agreement different from that of other markets such as the US? (10 marks)  (vii) The diagram below shows the performance of Prada shares from June 2011 to June 2014. The first day of public trading of Prada’s shares was 24 June 2011. Shares were sold in the IPO at an offer price of HK$ 39.50. More information on daily share price movements is available in the Excel file (1913.HK shareprice).  Source: Yahoo Finance  0.00  0.00  10.00  10.00  20.00  20.00  30.00  30.00  40.00  40.00  50.00  50.00  60.00  60.00  70.00  70.00  80.00  80.00  90.00  90.00  Prada’s share price performance (HK $)  Prada’s share price performance (HK $)  January 2021 SEMESTER – ASSIGNMENT QUESTIONS  Page 3 of 3  Based on a visual examination of the chart above, how does the performance of the Prada IPO compare with average IPO performance documented by past empirical studies  i. in terms of the short term (1st trading day or the first week of trading)?  ii. and over the longer term (3 years)?  Past studies have suggested a number of explanations for short-run underpricing and long-run underperformance of IPOs. Discuss the ones which you think are relevant to Prada’s case? (12 marks)  (viii) In the light of the main theories of capital structure, provide a discussion of the evolution of the capital structure of Prada in the initial three years after its IPO. You will find Prada’s Annual Report 2013 helpful in answering this question. (10 marks)

A drilling rig uses a hoisting system to drill wellbores

A drilling rig uses a hoisting system to drill wellbores. After drilling a 25,000 ft well, it is established that the drilling bit needs to be replaced by tripping out (i.e. pulling out). The available engine horsepower for this operation is 3500 hp.

    1. Considering the following data, estimate the maximum travelling block speed when the length of drilling string is 1500ft.
      1. Average drag force is 0.0025 𝑙𝑏𝑓/𝑓𝑡 per 1 𝑓𝑡/𝑚𝑖𝑛 speed of drillstring,
      2. Weight per foot drill pipe = 22 lbf/ft,
  • Weight per foot of drill collar = 170 lbf/ft,
  1. Length of Drilling collar= 1200 ft,
  2. Mud weight is 10 ppg,
  3. Hoist efficiency is 79%
  • Drawworks efficiency is 81%.
  • Drillstring density is 65.5 ppg
  1. Neglect the weight of the bit.
  2. While pulling the drilling string out of the well, a fracture is created at the depth of 2000 ft where pore pressure is 880 psi and mud loss occurs until pressure equalises at that depth. Determine the height of mud column in the well after losing mud into the fracture.
  3. Redo part A considering the calculated mud height in part B.

Reservoir properties distribution for a typical reservoir within the pay thickness interval

Reservoir properties distribution for a typical reservoir within the pay thickness interval 10653 -10686ft is given in below. A cut-off permeability of 20 mD was applied throughout the distribution. Reservoir pressure and bottomhole pressures are 3000 psia and 2000 psia respectively. Wellbore and external drainage radius are 0.3 ft and 2500 ft while oil viscosity is 2.5 cP. Calculate the following:

    1. Production rate (bbl/day)
    2. Productivity index (PI), if the pressure drawdown is 800 psia. (15 Marks)

 

Permeability values for depth interval 10653-10686 ft

 

Depth Interval (ft) Permeability (mD)
10653 – 10657 58
10657 – 10663 18
10663 – 10669 55
10669 – 10675 65
10675 – 10680 70
10680 – 10686 72

An offshore platform producing reservoir fluid of 7000 Scf/STB

An offshore platform producing reservoir fluid of 7000 Scf/STB and basic sediment content of 2%. As the surface facility engineer, suggest an appropriate separator to be used on the platform.

Determine the required pressure differential for overbalance drilling to a depth of 7800 ft

Determine the required pressure differential for overbalance drilling to a depth of 7800 ft and mud density is 9.5 ppg. Given that the pore pressure is 3500 psi.

 

Consider below oil window graph and suggest at which depths

Consider below oil window graph and suggest at which depths you may expect the generation of heavy and light oils plus wet and dry gases, why?

Capillary pressure is plotted versus water saturation for five rock samples

Capillary pressure is plotted versus water saturation for five rock samples with permeabilities of 3 , 10, 30, 100, and 300md. Allocate the permeability values to the sample numbers. Which one is the best reservoir rock and why? You need to mention at least two reasons.

Determine the type of below reservoirs

Determine the type of below reservoirs (i.e. A, B, and C). Explain your answer. Which of these reservoirs is represented by below phase diagram and why?

A cylindrical sample of a reservoir rock is recovered from the depth of 4325m

A cylindrical sample of a reservoir rock is recovered from the depth of 4325m. The sample has a porosity of 21% at reservoir condition. Wireline log analysis reveals that gas and oil saturations on the same depth are 15 and 23 percent respectively. You have asked to measure the absolute brine permeability of the sample.

    1. How you will measure the permeability?
    2. Is this value represent actual oil permeability in the reservoir? Why?

 

We have collected 3 samples from the nearby well with grain size analysis

We have collected 3 samples from the nearby well with grain size analysis shown in the below figure. Briefly explain how fine, coarse and poorly sorted grains affect the reservoir quality. Rank these three samples based on their porosity and permeability