IPO Valuation FIN-605 Md. Miran Hossain College of Business Colorado State University 10 September, 2012 1. What are the advantages and disadvantages of going public? Discuss the IPO process. The Advantages of Going Public Financial Benefit The financial benefit in the form of raising capital is the most distinct advantage of going public. Capital can be used to fund research and development, fund capital expenditure or even used to pay off existing debt. Moreover, once the company is public, it has access to a new and liquid source of capital for any future needs it may have. Increased Public Awareness As IPOs often generate publicity by making a company’s products known to a new group of potential customers, it created …show more content…
Investors can even attempt to unseat the management team by approving a different Board of Directors if they feel that growth rates are below their expectations. IPO Process Once the decision to go public is made the IPO process starts in full force. Typically the process from start to finish normally lasts about 3 months. A brief process of implementing an IPO has been described below: Select an Investment Bank/ Underwriter The very first step in the IPO process is to select an investment bank/ underwriter. Throughout the process, the underwriter is responsible for making the issuance a success. Public offerings can be managed by one underwriter or by multiple managers. The lead manager is responsible for assembling the group of underwriters. Holding the all-hands meeting An all-hands meeting should be attended by all members of the registration team company management, independent auditors, accounting advisors, underwriters, the company’s attorneys, and the underwriters’ attorneys. The purpose of this initial organizational meeting is to discuss the nature of the offering and the appropriate SEC registration form, coordinate responsibilities for sections of the
Even if the company is not taken over, the fear of takeover may prevent its co-operate board and managers from straying too far from profit maximising.
Choosing two profitable stocks amongst a myriad of potential alternatives is a daunting task to say the least. In order to narrow my choices from thousands to two, I examined several aspects of companies I was interested in. Among these were, company overview, alpha and beta ratings, price ratios, price charts, and company headlines. After evaluating this information, I chose Intuit INC (INTU) listed on the NASDAQ and Johnson and Johnson (JNJ) listed on the NYSE.
The stock market has increased from 1.896 in ’86 to 4.789 in ’95 thus creating an incentive for DLJ to offer an IPO. Strategy involved being the IPO allowed employees to exchange their compensation plans for shares and options in DLJ thus giving them an incentive to stay with the company. There were also many advantages and disadvantages related to DLJ going public. Advantages included DLJ increasing liquidity and allowing founders to harvest their wealth, permitting founders to diversify, facilitated raising new corporate cash, established value for the firm, and increasing the potential markets. Disadvantages included the cost of reporting, new disclosure requirements, self-dealings, a possibility of inactive markets reducing price, the firm losing some of its control, and a higher degree of investor relations had to be maintained.
This report examines the value of Nordstrom Inc. stock and offers existing shareholders and prospective shareholders an insight into the value of the company. The purpose of this report is to provide potential shareholders with information as to why they should buy into the company and existing shareholders with information as to why they should hold their stock.
This company in recent past was floundering under a leadership and management style that had become bloated and unproductive. The board of directors had swelled to more than 50 members with no clear lines of communication between the board, the CEO, and management. This created a void as directives and tasks became poorly understood and remained unfinished. The goals of
There are considerable advantages with obtaining equity through the IPO process. There are, however, some drawbacks that also need to be taken into consideration. Some of the advantages and disadvantages are:
The executives are accountable to the board of directors. Instead of protecting the investors, the board enticed the culture of financial fraud in the company for selfish gains. It failed in its duties in keeping the executives in check.
The Boeing Company was formed in 1916 by William E. Boeing in Seattle, Washington. The following year they had a twenty eight person payroll which included pilots, carpenters, boat builders and seamstresses. The lowest wage was fourteen cents an hour, while the company's top pilots made two to three hundred dollars a month. When the company was short on money, William Boeing used his own financial resources to guarantee a loan to cover all wages, which was a total of about seven hundred a week. ("Boeing History," n.d)
Therefore, these concerns can only be handled after the company decides on the offering structure, which defines investor’s demographic and a precise stock exchange to list on. Afterward, the company and its underwriters must begin to prepare the required documentation for both potential investors and regulators. The main documents are registration statements and a prospectus which contains all the financial and non-financial information that potential investors require in order to make the investment decision. In most countries, the contents of the prospectus must be approved by the local securities regulators before it can be distributed to potential buyers. (Bodie et al. 2005,