As you can imagine, an IPO is not always smooth sailing and it comes with great responsibility. Everybody wins in a successfully executed IPO round with a fair price level for the public as well as the founder(s). And if done right, this lucrative service can be very rewarding for you as an equity analyst, your team and your bank in the long run.
In this article, I will introduce robust workflows in Python which can greatly improve your financial research and help you automate crucial aspects of an IPO process. Below, you will learn how to tackle the most challenging aspects of an IPO process by accessing state-of-art open-source tools and using Python.
Table of Contents
- - IPO Overview
- - Individual Examples and Commands:
- - Automating IPO Workflow with OpenBB Routines
- - Summary
IPO Overview
The project typically originates from a corporate client that has decided to go public and needs to raise capital through an Initial Public Offering (IPO). The client would engage the bank's ECM team to manage the IPO process.
IPO Case with Python
Let’s say you are working for a leading investment bank that has just made an IPO agreement with founders of a next generation online marketplace that’s revolutionizing the way people buy and sell goods and services.
As an Equity Analyst that’s taking responsibilities in an IPO process, you would play a pivotal role that accelerates the future of this innovative tech company which requires taking into consideration a thorough due diligence, investor demand and market positioning.
Let’s start making a few OpenBB command examples which can be useful in the IPO process. Here we’re using the OpenBB terminal to replace functionality you would typically achieve with a platform like Bloomberg.
Example 1: FIPO (List of Future IPOs)
FIPO is an OpenBB command that lists upcoming Initial Public Offerings (IPOs) and related information. It provides details about companies planning to go public, including their names, expected IPO dates, offering price range, IPO exchange, stock ticker and number of shares.
We can use the FIPO command to get an idea about the general IPO trends and what kind of companies are planning to go public in the near future. You can find FIPO under the stocks and discovery section of OpenBB terminal. Here is an animated example.
Example 2: PIPO (List of Past IPOs)
Similarly, the PIPO command can be very useful to scan past IPOs.PIPO includes details such as the company's name, ticker, the date when it went public, the initial offering price and the amount raised allowing analysts to research and analyze the track record of companies that have completed their initial public offerings.
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Example 3: Treasury Rates
By giving a quick glance at macroeconomic indicators you can gain insight into liquidity in the markets and potential trend development. In finance (and all industries), sometimes we focus on a specific niche and forget to check the overall conditions in our industry, or the broader economy. It’s wise to be aware of the broader environment.
We’ll use the treasury feature under economy at OpenBB Terminal.
Example 4: Screener Valuation & Ratios
Key financial ratios and metrics can greatly enhance the decision-making process. Valuation metrics connect you with the company's financial health, growth potential, and market positioning. For instance, metrics like Price-to-Earnings (PE), Price-to-Sales (P/S), and Price-to-Book (P/B) ratios help analysts assess overall valuation which aides in the determination of the IPO offering price.
The Price/Earnings-to-Growth (PEG) ratio factors in growth prospects, which is essential for gauging investor sentiment. Analysts also rely on metrics such as Price-to-Cash Flow (P/C) and Price-to-Free Cash Flow (P/FCF) to assess cash flow efficiency and sustainability, crucial for evaluating the company's ability to fund operations post-IPO.
Furthermore, earnings per share (EPS) metrics, including current, past, and future figures, help analysts project earnings potential and influence pricing decisions. Sales metrics and the 5-year price change provide additional insights into the company's revenue growth trajectory and historical stock price performance.
Better yet, we can run the valuation command from the stocks screener module with the -p flag which signifies presets. For example using a preset such as sp500_technology_sector will be more relevant. Below you can find all the available presets included inside the OpenBB Terminal.
Various Preset Options for the Screener Module:
(choose from '5pct_above_low', 'stocks_strong_support_levels', 'rosenwald', 'sp500_consumer_defensive_sector', 'top_performers_healthcare', 'under_15dol_stocks', 'top_performers_all', 'potential_reversals', 'high_vol_and_low_debt', 'sp500_technology_sector', 'short_squeeze_sca', 'golden_cross', 'oversold_under_5dol', 'sp500_consumer_cyclical_sector', 'cheap_oversold', 'rosenwald_gtfo', 'sp500_financial_sector', 'buffett_like', 'sp500_basic_materials_sector', 'value_stocks', 'sp500_industrials_sector', 'sdk_guide_preset', 'analyst_strong_buy', 'modified_drema', 'oversold', 'ews_scanner', 'sp500_utilities_sector', 'modified_neff', 'recent_growth_and_support', 'sp500_real_estate_sector', 'djia_components', 'continued_momentum_sca', 'top_performers_tech', 'cheap_bottom_dividend', 'weak_support_and_top_performers', 'sp500_energy_sector', 'heavy_inst_ins', 'golden_cross_penny', 'sp500_healthcare_sector', 'undervalue', 'growth_stocks', 'break_out_stocks', 'simplistic_momentum_scanner_under_7dol', 'cheap_dividend', 'death_cross', 'channel_up_and_low_debt_and_sma_50and200', 'unusual_volume', 'bull_runs_over_10pct', 'sp500_communication_services_sector', 'sexy_year', 'oversold_under_3dol', 'top_gainers', 'top_losers', 'new_high', 'new_low', 'most_volatile', 'most_active', 'overbought', 'downgrades', 'upgrades', 'earnings_before', 'earnings_after', 'recent_insider_buying', 'recent_insider_selling', 'major_news', 'horizontal_sr', 'tl_resistance', 'tl_support', 'wedge_up', 'wedge_down', 'wedge', 'triangle_ascending', 'triangle_descending', 'channel_up', 'channel_down', 'channel', 'double_top', 'double_bottom', 'multiple_top', 'multiple_bottom', 'head_shoulders', 'head_shoulders_inverse')
Example 5: Sector Data
Sector data offers a comprehensive view of the market's performance, including returns, trading volumes, and other relevant metrics. This data is instrumental in conducting a thorough market analysis, enabling bankers to understand the sector's growth trends and potential. By comparing its financial performance and projections to sector averages, the company can be benchmarked which is useful to showcase its competitive edge to potential investors.
Automating IPO Workflow with OpenBB Routines
A very useful OpenBB feature is the recording of macros from financial commands. This feature is called “Routines” and it enables analysts to record macros of repetitive tasks and holds significant utility in financial analysis.
Primary advantage of Routines lies in time efficiency, as it automates repetitive calculations and data manipulations, reducing the likelihood of errors. Analysts can establish consistency by creating standardized routines, ensuring uniformity in analysis across diverse sectors, datasets and asset classes.
Routines simplify complex analyses and can make them accessible to the broader team.They’re also very useful for generating reports and roadshow documents efficiently. Below we will create a couple of “Routines” examples to and when we’re done you’ll be able to run all these workflows on your machine.
Routines Example 1: Creating OpenBB Routines
Let’s go through an example. To start recording, type record and press enter.
OpenBB will start recording all the commands you type until you type stop to conclude the Routine recording session.
We will merge some of the commands above each time navigating back to the main menu using the conventional “..” notation. After each command we will initiate a new command from the main menu.
record
/stocks/disc/fipo -d 30
../pipo -d 30
../../../economy/treasury -m 10y
../../stocks/scr/valuation -p sp500_technology_sector
stop
- -d flag signifies days (-d 30 next or last 30 days)
- -m flag signifies maturity
- -p flag signifies preset
Routines Example 2: Running OpenBB Routines
- Your routine file will be saved in a folder called routines inside your OpenBBUserData directory by its creation date. To Execute a routine:
exe -f 20230905_183013_routine.openbb
Example default file name:
OpenBBUserData/routines/20230905_183013_routine.openbb
Once your routine is created you can just run it with the exe command and nothing else is needed to have all the necessary output in one go.
- Similarly, you can find routines saved by the community on OpenBB Community Routines. Community routines, or routines that are saved on cloud can be run simply by using their http link combined with exe command as below:
exe https://my.openbb.co/u/montezdesousa/routine/mr-donato-question
Summary
In this article, we explored how advanced workflows and open-source tools, along with Python, can enhance financial research and automate key aspects of the IPO process.
In the second part of this tutorial, we will explore opportunities to further streamline this workflow. We will port our OpenBB analysis into the Microsoft Office Suite to create a continuous workflow for the IPO process.
Let's face it. As far as things are moving. Microsoft Suite is not giving up its place in your workflows. By aggregating your data and analysis into tools like Excel, PowerPoint, and Word, you’ll not only be able to achieve more efficient workflow and superior insights, but you’ll be able to present your work in a way that your VPs and MDs, not to mention potential investors and other stakeholders, are familiar with. This automation saves valuable time while ensuring accuracy and consistency in the information presented, strengthening the overall presentation and stacking the odds of a successful outcome for your team, firm, and clients, during the IPO roadshow process. With these advanced tools and practices, you can navigate the competitive world of IPOs with greater efficiency and finesse as an equity analyst.
Written by Umut Sagir, MSc Finance
