Aqua Resources to list on London Stock Exchange - Research Paper Example

Aqua Resources to list on London Stock Exchange Introduction Aqua Resources Fund Limited was incorporated on 12 June 2008 as a closed-ended investment fund in the water resources sector with limited liability under The Companies (Guernsey) Law, 1994 as amended. The Company was established pursuant to the framework introduced by the Guidance Document issued by the Guernsey Financial Services Commission. The company expects investments in the fields with estimated return in excess of 15% with a completion of the rest of the 80-85% to take place in the following 12-18 months. This study aims at analyzing both the short and the long-term shareholder wealth effect that resulted from Aqua’s Initial public offering on the London stock exchange. Specifically, my research will investigate the effect on the company’s share price following an inclusion to or exclusion from the S&P 500. Through the IPO, we will be able to know:- i. The number of shares listed by the will be known and the shareholders according to the shares listed will as well be known. ii. The growth strategy of Aqua Ltd will be pre-determined at a constant percentage a measure that will make it easier to always estimate the shareholders worth depending on the pricing of the shares. iii. This information will intern enable the determination of the shareholders wealth returns depending on the number of the subscribers. Literature review While others have announced the effects on wealth after the announcement of listing of shares this study will indicate the long and short-term effects on the wealth of shareholders who list through their various companies in the London Stock Exchange. The case to be used in this study is the Aqua Ltd. Aqua invests principally in businesses that are involved in - water treatment and recycling, wastewater and recycling, water treatment and purification, water infrastructure, water application and conversion (water-to-energy and desalination) with the objective of capturing the growth opportunities emerging from the attractive long-term dynamics driving the water industry. Aqua's investment objective is to provide long-term capital appreciation through exposure to a diversified portfolio of water-related investments. Pursuant to this objective, Aqua's ordinary shares were admitted to listing on the Official List of the UK Listing Authority and to trading on the main market for listed securities of the London Stock Exchange plc on 24th July 2008. Aqua is a Guernsey-domiciled Authorized Closed-ended investment scheme pursuant to section 8 of the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended and rule 6.02 of the Authorized closed-ended Investment Schemes Rules 2008 (A Proposal for putting some stop to the extravagant humor of Stock-Jobbing). The study examines a variety of measures to gauge the wealth effects, including buy-and-hold excess returns, excess returns around earnings announcements, and industry-adjusted operating performance. This is done to monitor the flow of wealth in terms of the working outlay of the shares in the stock market. From the study, we find that the old stocks underperform during the preannouncement period. This evidence suggests that the listed stocks were issued after periods of poor performance hence a boom period has to be allowed to take shape for the contrasts to be covered up and avoid spinoffs and carve outs. The pre-announcement returns by the London Stock Exchange provides some evidence on the circumstances that lead to listing stock and restructurings that take shape thereafter. However, the wealth effects of restructurings can only be measured starting with the announcement returns after the end year compilation of financial data. We find that the average announcement excess returns are significantly positive and range between 1.8 and 2.7 percent relative to different benchmarks placed. These returns are similar to those documented by previous studies of listing stocks in the stock exchange (Rules and regulations adopted by the committee for general purposes of the Stock-Exchange). Data Information on share prices and market indices, on the risk-free rate by country (3-month Treasury Bill rates), on risk measures and accounting information was collected from DataStream. For both the company listed and the other rivals in the same industry, we collected the following additional information using DataStream and the Financial Times. Industry (SIC) codes indicate the degree of corporate diversification of portfolio. The market capitalization of Aqua, the market to book value (MVBV) representing the growth potential of the shareholder wealth, dividend yields (DY), interest coverage (IC) representing potential financial distress, and the amount of liquid assets (NC) (cash and short-term loans, deposits and investments). All these divided by total market value, the price to cash flow (PCf), assets per share (APS; measured as net tangible assets (fixed assets less depreciation, plus longer-term investments and current assets, less current and deferred liabilities and prior charge capital and minority interest). This divided by the number of shares at year-end), and there turn on equity (ROE) were collated. We calculated relative listing value size using the market capitalization at least 6 months prior to the announcement. Finally, we also recorded the country in which the targets and bidders are located: our sample embraces firms from 18 other firms in the same investment industry (Sanger). Methodology The methodology to be employed here is the observation method; here the shares by the shareholders listed in the stock exchange will be observed in all their aspects and analyzed. The number of shares listed and the shareholders will be known, alongside this, the value of each shareholder from the start will be recorded to aid in the monitoring of the progress of the shares. This will also be supported by the predetermination of the growth of Aqua Ltd, which will help in the predetermination of the growth of the value of the shareholders as a contextual measure. As has been proposed before there will not be an analysis through value analysis using statistical measures as finding the absolute and sure values for the same may be an uphill task and the stock exchange may not be willing to provide the highly confidential matters of their operations. Depending on the information, which will be retrieved from this foreign exchange data, the values of each shareholder at each stage of their operations will be known and depending on the percentage of the growth on each shareholders wealth, a conclusion will result to enable the stakeholders in conducting their decisions. In addition, calculations of the relative listings were calculated and the results presented to the team of analysts who were also the observers in their various fields of operation (Songs of the Stock Exchange. By a Stock Dove). Conclusion Investment of the company in stock exchange does not realize returns on the spot. I since the start of the companies operations in the stock exchange in the year 2008, the growth in the shareholders worth is only realizable in the year 2010 which is slight. From the calculations, most so of the relative price listings, there was a mishap of information as majority of the information provided by the London Stock exchange were most of the cases inaccurate or surpassed by time hence irrelevant (WoÌjcik,). For such studies to serve their actual purpose, al the stakeholders must be assured of the safety of the information they are required to deliver given the relatively competitive environment that the operations are expected to be in hence value addition is necessary. In the final reports to the shareholders, they should be advised accordingly depending on whether their shares have increased in value hence the shareholder’s wealth or otherwise. This is due to the sole reason that not all shares would increase in value at the same time as the operation environment of each and every company are affected by various factors hence unlikely to perform as the others given the same time period. Shareholders wealth most so if they are improving as a motivating factor hence must be highly taken care of. Works Cited A Proposal for putting some stop to the extravagant humor of Stock-Jobbing. New York, NY: Legend Press, 2000. Print. Rules and regulations adopted by the committee for general purposes of the Stock-Exchange. London: Couchman (pr.), 2012. Print. Sanger, Gary C. Stock exchange listings, firm value, and market efficiency. Ann Arbor, Mich.: UMI Research Press, 2012. Print. Songs of the Stock Exchange. By a Stock Dove. London: Simpkin, Marshall & Co., 2004. Print. WoÌjcik, Dariusz. The global stock market: issuers, investors, and intermediaries in an uneven world. Oxford: Oxford University Press, 2011. Print. Read More