10 TRX, Inc.- Initial Public Offering

Equity  Issuance  Process     Case:  TRX,  Inc.:  Ini8al  Public  Offering  

Public  Issues  

IPO   •  •  •  •  •  •  •  •  •  •  •  •  •  •  •  • 

Advantages   Immediate  inflow  of  capital   Improving  D/E  ra8o   Raising  addi8onal  funds  in  future   Increased  value  for  the  company   Less  dilu8on   Higher  price  for  promoters  exit   Win  customers   Secure  financing   Expansion   Effect  merger  or  acquisi8ons   Access  to  Capital  Markets   Greater  Liquidity  and  Fair  Value   Transparency     Greater  Goodwill   Exit  Route  for  Venture  Capitalists  

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Disadvantages   Highly  expensive  (17%)   Risk  of  devolvement  of  the  issue   Absorbs  large  amount  of  8me  and   energy   Loss  of  privacy   Control  dilu8on   Reduced  flexibility   Increased  pressure  from  share  holders   Difficulty  in  maintaining  good  investor   rela8on  at  regular  intervals   Vola8lity  in  stock  prices   Addi8onal  cost  as  a  public  company   Cumbersome  &  costly  process   Lack  of  sincerity  due  to  separa8on  of   ownership   Greater  responsibility  in  providing  data   Promoters  stand  to  loose  control   Some8mes  share  prices  do  not   represent  fair  value  of  company  due  to   vola8lity  etc.  

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Prerequisite   Proven  track  records  and   good  earnings  poten8al   Desirable  products  or   services  or  valuable   intangibles   Clear  sense  of  direc8on   Sufficient  market   Good  management  team   and  style   Strong  systems   Objec&ves   Expansion  or  debt   refinancing   Divestment   opportuni8es   Future  funding   Valuing  firm  by  public   Enhance  corporate   viability  an  reputa8on   Enable  borrowing   Exi8ng  promoters  

IPO  Process   •  •  •  •  •  •  •  • 

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Pre  Requisites   Generate  credible  business  plan   Gather  qualified  management  team   Create  an  outside  BOD   Prepare  audited  financial  statements   Performance  measures  and  projec8ons   Develop  rela8onship  with  investment   bankers,  lawyers  and  accountants   Holding  Bake-­‐off  mee8ng  with  poten8al   investment  banks  to  discuss  the  equity   issuance  process  with  a  no.  of  candidates   before  selec8ng  a  lead  underwriter  

Important  characteris&cs  of  an   underwriter   Proposed  compensa8on  package   Previous  track  record   Analyst  research  support   Distribu8on  capabili8es   A^er  market-­‐making  support  

Event  8me   Event   (in  Days)     1  …..the  IPO  has  outperformed  the   market  in  that  period   WRit