Acta Universitatis Danubius. Œconomica, Vol 11, No 4 (2015)

Abstract

Most young private firms use the Initial Public Offer  (IPO) method to raise additional external equity fund to finance their growth and later create a secondary market for stocks.  This study analysed the projected  utilisation of   IPO  cash proceeds by Nigerian  firms with a view to providing investors with information on the most critical areas that firms intend to channel those funds.

The study used the cross-sectional data collected by Ilo (2012)   on firms that issued IPOs from 1999 to 2009 on the Nigerian  Stock Exchange (NSE). The data were analyzed  using descriptive statistics such as, the means and percentage and analysis of variance.

The results show that the average of IPO price is N19.09 per share.  About 51% of the net proceeds is projected to be expended on business growth/ expansion and facility acquisition while 20 % is reserved for working capital needs to support the expansion.  The initial investors are to enjoy a promoters’ cash-out of about 24% of the net cash raised.  These projections are laudable investors should interpret the findings with caution since actual deployment of such funds  may not necessarily conform with the projections except they are able to ensure adequate monitoring of the managers