This case is about Netscape Initial Public Offering (IPO) in 1995. Netscape had a successful starting in the market mainly because of their strategy of “Give away today and make money tomorrow”, which let them capture 75% of the web browser market, making it the most popular browsing software. The successful strategy consists in gaining its large market share by initially giving away its product for free. Netscape had to create a new industry standard to succeed in the long term, besides make revenues by selling server software to companies that require marketing access to potential consumers, by selling its software packages and through providing servers on the world wide web, consulting, maintenance, and support services. The success of …show more content…
Also the pressure to increase current earnings represents a disadvantage on going public. Netscape IPO is characterized as a “hot issue” market because of the high expected returns earned by initial buyers of the shares. Such desirable returns occur as a result of either underpricing or oversubscription of a company’s shares. The phenomena of hot issue market is explained by the high demand of the stock, making the price of the IPO increase from 14$ to 28$. Netscape should be concerned about underpricing because the market was highly increasing and also the competitors were growing as fast as the market did. Volatility and also uncertainty made the stock risky which increase the probability of underprice the stock, as it is the case with many IPOs. As we can see in the exhibit 6 the comparable companies has lower stock price. Netscape weas the leader in the product they were offering and they used this advantage. However, with new competitor in the market and including the risky position, 28$ could be consider a high price. We value the
The largest stakeholder of Netscape’s equity was Jim Clark, who accounted for 24%. The other primary owners were the venture capital firm Kleiner, Perkins, Caufield, & Byers, a group of six media companies led by Adobe Systems, and Netscape’s president and CEO, James Barksdale. They held 11%, 11%, and 10% of Netscape’s equity, respectively. The ownership shares of Netscape did not correspond to the investments made by the primary owners because the owners made their investments at different times. Jim Clark invested in Netscape first and therefore paid the least amount of money for the largest share of the firm. His second investment came at the same time as Kleiner Perkins, and at that point the price to purchase a share of Netscape had obviously increased. Clark’s total investment amounted to $3.5 million for 24% of the firm, whereas Kleiner Perkins paid $5 million for 11% of the firm. The investment made by the media companies came later, when the price of Netscape had risen even further. Therefore, the media firms purchased an aggregate 11% share of Netscape for $18 million. The final primary owner, Barksdale, was not said to have invested any capital in Netscape. However, as president and CEO, it can be assumed that he was offered a 10% share as an incentive to guide and motivate the company to perform well.
6. As an executive of Netscape, what would you recommend with respect to the proposed offering price? As an investor in Netscape, what would you recommend? AS a manager of an institutional fund who is willing to buy and hold Netscape’s stock at the originally proposed price of $14 per share, would you be willing to buy and hold at an initial offer price of $28.
The name was later changed to Netscape Communications Corporation when the University of Illinois (which owned the trademark on the name Mosaic) threatened legal action. Netscape can be considered an advocate for the dot com era. They were not the first internet start-up, but they were the only one that mattered. Netscape produced Netscape Navigator which went on to become its first widely popular internet application. Netscape Navigator became really popular after the launch of the World Wide Web. Netscape Navigator introduced millions to the web. SSL, Java, JavaScript, open APIs and support for online media were innovations that Netscape Navigator made relevant. The next best thing of Netscape was the Netscape IPO. It helped launch the internet era that we are currently living in. It is thought that Netscape was born in Silicon Valley, but actually it was in Champaign Urbana, Illinois at the University of Illinois. It all started with a bunch of young programmers and software developers hanging out in a basement. The group was called the software development group. These programmers and software developers were working for barely above minimum wage at the National Center for Supercomputing Applications (NCSA). Aleks Totic and Jon Mittelhauser were a part of the group. Totic went on to develop Mac versions of both Mosaic and Netscape Navigator and Mittelhauser went on to develop the Windows
The time is now 1995; the internet is slowly evolving, and just as the company survived the arrival of television and other technology so it must with the internet. Convinced the internet will have
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.
In order for Microsoft to be able to reach the goals set by Bill Gates, they must use their considerable resources efficiently to create a place in each market for the online consumer. If they wish to produce and offer online services such as electronic mail, information data bases, personal finance management, video on demand, and electronic commerce, then acquiring firms already specialized in at least some of these areas is the most efficient way to do so. Intuit’s products align with Microsoft’s without significant overlap such that the combined firms would provide a handsome horizontally integrated suite of products with prime market share positions including word processing (49% market share), spreadsheet (48% market share), tax preparation, accounting, banking, and bill paying which would all open up the prospect of continued online grazing by the user leading to repeat sales to Microsoft’s video on demand and future entertainment market. The larger objective would be to capture the user in a web to conduct direct financial transactions over the
After that, we analyses the company’s financial performance through analyses the recent three years’ annual report from 2013 to 2015. Based the previous steps, we could conduct the evaluation of the company through many comprehensive indexes like WACC and two-stage discounted free cash flow model, we get the stock price by both FCFF and FCFE are $8.06 and $7.44 respectively , compare to the current price of 20 May 2016 is $10.36, and the price is overvalued.
“All of these qualities were evident in Gates’s nimble response to the sudden public interest in the Internet. Beginning in 1995 and 1996, Gates feverishly refocused Microsoft on the development of consumer and enterprise software solutions for the Internet, developed the Windows CE operating system platform for networking non computer devices such as home televisions and personal digital assistants, created the Microsoft Network to compete with America Online and other Internet providers, and through Gates’s company Corbis, acquired the huge Bett mann photo archives and other collections for use in electronic distribution.
First, Microsoft ‘encouraged’ Compaq, Apple, and other computer manufacturers to promote only Internet Explorer, and to make that the default browser on their PC. This encouragement came in the way of threats to eliminate or delay licensing of operating systems, providing the browser for free to internet access providers, and bundling the software with the operating system under the guise of interactive ease for the consumer. This manipulation led to an increase in the browser’s sales by 45 to 50%, which paralleled the decline Netscape experienced in their market sales in 1998.6
had used tactics to protect the monopoly it had over the software and browser industry. The case
In this paper the questions regarding a businesses decision to go public will be addressed. Recent changes such as Sarbanes-Oxley governance ruling have had significant impact on the planning and execution of IPO's however, going public still remains the best route to additional capital for a company. We will also take a look at Google's successful rollout of their public offering. However first we need to look at what it takes for a company to go public. In the text of the Fundamentals of Corporate Finance the initial description of IPO succinctly captures the essence of need and subsequent process of an IPO.
The management of JetBlue and its underwriters can also price the IPO using valuation multiples. JetBlue can employ the most current comparable data of the most appropriate competitors in terms of value in the airline industry. Valuation multiples that can be employed include, but are not limited to P/E multiples, EBIT multiples, EBITDA multiples. In this scenario, I choose to use Southwest airlines and Ryanair as the major benchmarks, because they are both considered as major low –fare airlines, and are key competitors in the United States and Europe. Nevertheless, I believe the P/E ratio is the stronger valuation tool to determine the true value of a firm. Using this method we come up with a share price of $19.32 for Southwest
(1) According to the case, global IPO activity during the first quarter of 2012 fell to $14.3 billion, which was dramatically down from $46.6 billion during the first quarter of 2011. In addition, we can see in Exhibit 5 that IPO activity in US have dropped sharply since the second quarter of 2011. Number of deals dropped from 383 in the second quarter of 2011 to 157 in the first quarter of 2012.
Many of the companies related to internet made their public debut in amazing fashion in the 1990s and by 2002 they had disappeared into oblivion, Rajwade, AV (2000, January 17). E Toys as one of the example, in May 1999, when the internet revolution was in full swing, e Toys enjoyed a greatly successful initial public offering, its shares at $20 each rose to $78 on their first trading day. At this point the company was less than three years old, and the sales had grown to $30 million for the March 31, 1999, end year; this was from $0.7 million in the preceding year. Due to this growth investors were very enthusiastic, having the general thinking that many of toys buyers were going to buy toys online but not at retail stores like Toys "R" Us. It was the displacement phase of the bubble as indicated by Couzin, Jennifer (2000, June 13).
That the share price has been so volatile is a measure of the risk in instigating an IPO in relatively uncharted waters.