Initial Public Offering

6 Key excerpts on "Initial Public Offering"

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  eBook - PDF

  Investment Banking

  Valuation, LBOs, M&A, and IPOs

  • Joshua Rosenbaum, Joshua Pearl(Authors)
  • 2021(Publication Date)
  • Wiley

    (Publisher)

  PART Four Initial Public Offerings 401 CHAPTER 8 Initial Public Offerings A n Initial Public Offering (IPO) represents the first time a company (“issuer”) sells its stock to public investors. The shares are then traded on an exchange such as the Nasdaq Stock Market (Nasdaq), the New York Stock Exchange (NYSE), the London Stock Exchange (LSE), or the Stock Exchange of Hong Kong (SEHK). Collectively, these primary exchanges comprise what is commonly known as “the stock market”. Each publicly traded company assumes a “ticker symbol”, typically a one-to-four- letter abbreviation that serves as a unique identifier. Once a company “goes public”, its shares will trade daily on the open market where buyers and sellers determine its prevailing equity value in real time. An IPO is a transformational event for a company, its owners, and employees. In many ways, the company and the way it operates will never be the same again. Detailed business and financial information will be made public and subject to analysis. Management will conduct quarterly earnings calls and field questions from sell-side research analysts. They will also speak regularly with existing and potential new investors. New accounting, legal, regulatory, and investor relations infrastructure and employees will need to be brought on board to handle public company requirements. While IPO candidates vary broadly in terms of sector, size, and financial profile, they need to feature performance and growth attributes that public investors would find compelling. Is the company and its addressable market large enough to warrant attention? Is it a market leader? How exciting is the growth opportunity? Is the cycle entry point attractive? How capable is the management team? Market conditions must also be conducive. The number of IPO offerings over a given time period is strongly correlated to the performance of the overall stock market. The better the market, the more plentiful the IPO pipeline.

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  Investment Banking

  Valuation, LBOs, M&A, and IPOs (Book + Valuation Models)

  • Joshua Rosenbaum, Joshua Pearl(Authors)
  • 2022(Publication Date)
  • Wiley

    (Publisher)

  PART Four Initial Public Offerings Passage contains an image

  CHAPTER 8 Initial Public Offerings

  An Initial Public Offering (IPO) represents the first time a company (“issuer”) sells its stock to public investors. The shares are then traded on an exchange such as the Nasdaq Stock Market (Nasdaq), the New York Stock Exchange (NYSE), the London Stock Exchange (LSE), or the Stock Exchange of Hong Kong (SEHK). Collectively, these primary exchanges comprise what is commonly known as “the stock market”. Each publicly-traded company assumes a “ticker symbol”, typically a one-to-four-letter abbreviation that serves as a unique identifier. Once a company “goes public”, its shares will trade daily on the open market where buyers and sellers determine its prevailing equity value in real time.

  An IPO is a transformational event for a company, its owners, and employees. In many ways, the company and the way it operates will never be the same again. Detailed business and financial information will be made public and subject to analysis. Management will conduct quarterly earnings calls and field questions from sell-side research analysts. They will also speak regularly with existing and potential new investors. New accounting, legal, regulatory, and investor relations infrastructure and employees will need to be brought on board to handle public company requirements.

  While IPO candidates vary broadly in terms of sector, size, and financial profile, they need to feature performance and growth attributes that public investors would find compelling. Is the company and its addressable market large enough to warrant attention? Is it a market leader? How exciting is the growth opportunity? Is the cycle entry point attractive? How capable is the management team?

  Market conditions must also be conducive. The number of IPO offerings over a given time period is strongly correlated to the performance of the overall stock market. The better the market, the more plentiful the IPO pipeline. Similarly, in a down market, the IPO spigot slows to a trickle or may shut off entirely. Even a highly compelling candidate would most likely choose to wait rather than launch in an unfavorable market and risk an unsuccessful deal.

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  The Funding of Biopharmaceutical Research and Development

  • David R Williams(Author)
  • 2013(Publication Date)
  • Woodhead Publishing

    (Publisher)

  7

  The Initial Public Offering

  Abstract:

  This chapter examines the Initial Public Offerings in the biopharmaceutical market sector. It focuses on U.S. firms that have gone public and offers insight into other markets. After giving a brief history of stock exchanges, it looks at the process of selling securities on a public exchange for the first time. It examines the role that underwriters (investment banks) play in bringing a security to market. The chapter looks at the costs of becoming a publicly traded firm and shows trends in this market and the effect of an IPO on the firm and its management. The chapter also examines the financial condition of firms that have gone public and historical trends related to stock price and net proceeds.

  Key words Initial Public Offering research and development expenditures underwriting IPO process IPO costs

  7.1 An introduction to the Initial Public Offering

  The term Initial Public Offering (or IPO) refers to the process by which a firm sells its stock for the first time on an open, public market. A public market is a place or system that allows for the exchange of a firm’s stock between individuals and entities. Examples of public markets or stock exchanges include the New York Stock Exchange (NYSE), NASDAQ, and the American Stock Exchange in the U.S., the London Stock Exchange in the United Kingdom, and Japan’s Tokyo Stock Exchange. Stock exchanges can be actual physical locations or virtual, on-line entities. Stock exchanges or markets allow individuals and entities the greatest opportunity to invest in other organizations.

  The reasons for firms to sell their stock on an open exchange include survival, growth, and exit

  1 –3

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  Nanotechnology

  The Business

  • Michael T. Burke(Author)
  • 2018(Publication Date)
  • CRC Press

    (Publisher)

  22 16 Public Offerings: Pitfalls and Benefits Another common means of exiting a company is to offer shares on public stock markets. This can be done either by a direct offering or by merging with or buying another company that has publicly traded stock. This chapter will discuss these two options as well as some variations on public offerings. The emphasis will be on looking at the benefits and pitfalls of not only the process but also the outcome: being a publicly traded company. The entrepreneur’s dream is to form a company and then take it public—in other words, sell shares on a stock market, raising money to fund his com-pany and at the same time becoming relatively wealthy. The truth is that preparing and conducting an Initial Public Offering (IPO) involves a plethora of details and a lot of work traveling and presenting the company to inves-tors. Then, when the company is publicly traded and shareholders have to be satisfied, the entrepreneur finds himself in a new environment, one in which he has nowhere near the control he had pre-IPO. This chapter will discuss the process and outcome of a public offering and will look at alternatives. Why Should a Company “Go Public”? The reason public markets came into existence was to provide a means for businesses with large capital needs to get access to that capital. Ownership portions, or shares, of a company were sold to individuals and organizations with the means to buy them. This meant that the companies offering these shares were no longer owned by one or a small number of people, generally the founders. Now the companies were owned by a very large group of share-holders, and the founders and managers found themselves no longer able to make all important decisions without consultation with or review by others. The senior managers and founders of companies did not lose the ability to make all of the day-to-day and most of the strategic decisions needed to build plants, hire workers, and sell products.

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  Running a Public Company

  From IPO to SEC Reporting

  • Steven M. Bragg(Author)
  • 2009(Publication Date)
  • Wiley

    (Publisher)

  PART I

  How to Go Public

  Passage contains an image

  CHAPTER 1

  The Initial Public Offering

  Introduction

  The Initial Public Offering (IPO) is considered by many business owners to be the true sign of success—they have grown a business to the point where its revenue volume and profitability are large enough to warrant public ownership. However, the road to an IPO is both expensive and time consuming and requires significant changes to a company. This chapter describes the pluses and minuses of being public, as well as the steps required and costs to be incurred in order to achieve that goal.

  Reasons to Go Public

  Though a management team may not say it, a major reason for going public is certainly to create a market for the shares they already own. Though these shares may not be available for sale for some time after the IPO, management will eventually be able to cash in its shares and options, potentially generating considerable profits from doing so. This reason is not publicized to the public, since the public would be less likely to invest if investors think the management team is simply cashing in and then leaving the business.

  A slight variation on the wealth creation theme is that, by having a broad public market for their shares, original shareholders are likely to see a rise in the value of their shares, even if they have no intention of selling the shares. The reason is that there is no longer a penalty for not having a ready market for the shares, which adds a premium to what the shares would have been worth if the company had remained privately held.

  The same logic can be used as a tool for employee retention. A private company can issue options to its employees, but they are worth little to the employees unless there is a market in which they can sell the shares. By going public, a company may experience increased employee retention, since they wish to wait until their options vest so they can cash in the resulting shares for a profit.

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  High-Profit IPO Strategies

  Finding Breakout IPOs for Investors and Traders

  • Tom Taulli(Author)
  • 2012(Publication Date)
  • Bloomberg Press

    (Publisher)

  Crowd funding . In 2012, the U.S. government passed legislation that made crowd funding legal. Essentially, this allows small companies to issue shares using the Internet. But keep in mind that these investments will likely not reach the IPO market for many years, if ever. In Chapter 22, we’ll take a closer look at crowd funding.

  Conclusion

  While it may seem tempting to get IPO shares for the opening day, it can be risky. Even Facebook fell over 20 percent within a few days of its offering. A better approach—at least for long-term investors—is to wait a quarter or two before jumping in. The hype will subside and the stock will get seasoned in the market.

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  Chapter 2

  IPO Basics

  It’s a common misconception that Initial Public Offerings (IPOs) are a guaranteed road to riches. Although there are many IPOs that do extremely well—like Google, NetSuite, Salesforce.com , Starbucks, and Chipotle—the fact is that IPOs are like any other investment: there is always risk. Before considering IPO investment strategies, it’s important for investors to understand what IPOs are and how they work.

  Anyone reading this book probably knows that an Initial Public Offering is the first sale of stock by a company to the public. It’s when a company makes the transformation from being privately held to becoming publicly traded, complete with its own ticker symbol. However, there’s probably a lot of other, more advanced IPO terminology that most people don’t know. For example: What does it mean when an IPO goes “effective”? What is the registration statement? What is the “red herring”? What exactly do the underwriters do? These questions—plus a great deal more about investing in IPOs—are covered in this book.

  This chapter takes a look at what motivates a company to launch an Initial Public Offering as well as a look at the drawbacks. We will also meet the major players in the IPO process.

  Why Do Companies Go Public?

  There is no single answer to that question. It’s a major decision that will surely change the character of a company and mean many sleepless nights for management. What’s more, an IPO is very expensive. The company will need to hire attorneys, accountants, printers, and many other advisers described later in this chapter.

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