Carpetright's Initial Public Offering : Or '12 Hours of Madness'

This case study illustrates the main issues relating to initial public offerings (IPOs) using the example of the UK carpet retailer Carpetright Plc which went public during 1993. Most of these issues are caused by the asymmetry of information that exists between the existing shareholders of the firm and the potential new investors at the time of the flotation. Such issues cover among others the firm's corporate governance as well as the issue's quality and future value. The case study illustrates that firms that are about to go public can use a range of signals to convey their superior quality to potential investors and to resolve the information asymmetry. The case study requires students to identify the various signals used by Carpetright Plc and to judge their credibility. Students will have to do their own research, analyse a wealth of - sometimes contradictory - information, and relate theories on initial public offerings and informational asymmetry to the characteristics of the firm analysed