Rosetta Stone Ipo Essay

4810 Words Aug 7th, 2012 20 Pages
Creating Public Shares
According to Brau and Fawcet (2004), the most common reason CFOs choose to provide an IPO on their firm is to create public shares for use in future acquisitions. While Rosetta Stone may not have immediate acquisition plans, the public offering of their shares will provide new capital for them to continue to expand. Only 5% of their revenue comes from outside of the United States, and with increased capital from an IPO, Rosetta Stone can look to pursue new markets (Schill, 2009). Whether they plan to increase their market share through internal investment or acquisitions of competitors, the increase in available capital is a huge advantage for a firm with such an aggressive growth strategy in mind. Conversely, many
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Revealing a great deal of information to competitors will serve some disadvantage, but Adams points out there are still multiples ways for the company to leverage their product.

Market Conditions
Often, factors influencing CFOs when making the important decision of whether to go public or not lie externally. Current market conditions play a huge role in the mindset of investors and will obviously affect Rosetta Stone’s IPO decision making process. Nearly half of all CFOs who withdrew their efforts to go public ranked external market and industry conditions as important factors. While the U.S. economy had suffered from heavy setbacks in previous years, economists surveyed by the Wall Street Journal projected positive growth in the second half of the year (Izzo, 2009). Additionally, the overall hotness of IPOs at the current time tends to have a great deal of influence over whether the shares of companies with IPOs settle above or below their originally filed price. In 2009, the majority of IPOs had a midpoint price above their initial offering, leading one to conclude that the market was currently hot (Ritter, 2011). Further alleviating the external worries of Rosetta Stone was a view expressed by Morgan Stanley that they were one of a few companies with a strong chance of having a successful IPO (Schill, 2009). While some external factors are worrisome and may…

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