Going Public Offers Companies A Plethora Of Opportunities

2075 WordsApr 20, 20179 Pages
Going public offers companies a plethora of opportunities that the company would not have if it were to remain as a private company. One obvious advantage companies have when they go public is the immense influx of cash that they receive from the original purchasing shareholders. This large sum of cash allows the company to grow and expand their footprint through more capital projects, hiring new talent and the like. With this equity financing, the company will not have to repay the money that it receives through its IPO. This provides the firm with a tremendous advantage that it would not have if it were to obtain capital through debt financing. Not having to repay the principal or interest on a loan allows the company to receive cash…show more content…
Finally, the public display of the company’s previously sensitive financial information could make the company lose the advantage of secrecy that it once had. There are several methods of valuation that can be brought forward for JetBlue Airlines to consider. The first method to consider is the book value method, which determines the value of a firm by looking solely at the book value of the firm’s assets. This method would virtually use accounting numbers to value the equity of a firm. The book value method is normally only appropriate for firms with commodity-type assets that are valuated at market with no intangible assets. This is not always a beneficial method to use because it ignores future cash flows for the firm and inflation effects. It is also more common for product-based businesses, which would not be viable for JetBlue Airlines because it is a service-based company. Next is the liquidation value method where the value of a firm is based on when the firm is no longer basing its value on its increase in future cash earnings and cash flow potential, and a higher yield would be determined by liquidating the assets within the company. The liquidation value method considers the sale of assets at any point in time. This is a good
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