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Initial public offering (IPO) plays an important role in providing firms with access to
financial resources that are crucial to growth and achievement of the long-term sustainablecompetitive advantage over competitors. An initial public offering is the realization of a
dream for many entrepreneurs, executives, board members and stockholders, a singular
achievement that demonstrates their success in building a strong business and creating value
for owners, employees and customers. However, an initial public offering is not only a
milestone, it is also the entrance into a new stage (life as a public company) that possesses its
own unique opportunities, risks and challenges. Precision Air Tanzania Limited has been
taken as a case study
This paper examines the impact of IPO under pricing to the performance of precision air Ltd
in the Dar es Salaam stock market in Tanzania, and make recommendations as to what
possible could be done so as to improve the prosperity of DSE and Precision Air
performance.
The research was done by using Secondary data. When collection the information main
sources were Precision Air and Dar-es-salaam Stock Exchange market trend of precision air
shares and also media played a small role in obtaining the information on Precision Air and
its performance.
The findings suggest that Precision Air IPO was initially underpriced just by 4% because of
information asymmetry but when investors started receiving true information about market
prices they decided to abstain from investing in precision air and the situation showed that
there was overpricing of Precision Air IPO since in the long run there are no prospectus of
high prices for Precision Air stock as the finings revealed. Also Precision Air in previous
years was going good in terms of profit. But later this changed the whole picture which again showed the level of IPO overpricing since underpricing brings long-term benefits which there are no signs of, in 3 years.
Finally the Precision Air IPO was still a success since it is the first aviation company in
Tanzania to be ever listed on the stock market |
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