Professional Documents
Culture Documents
by Brian O'Connell
They say on Wall Street that the best way to get rich is to buy a dollar for 50 cents, over and over again.
That’s the general idea behind initial public offerings – the financial market’s mechanism for buying stocks of newly minted public
companies for a low price and selling them down the road – sometimes not too far down the road – at a higher price.
IPOs aren’t as complicated as some might think. By definition, an initial public offering is the process by which a private company
turns into a public company. With an IPO, the company makes shares of its stock – known on Wall Street as “equity” – available to
investors. Usually, those shares trade on a public exchange, like the New York Stock Exchange or NASDAQ.
Preparing an IPO is similar to rearing a child, experts say.
“A new public issue is actually the culmination of years of hard work, market positioning, rounds of financing and business success –
rather like sending a child to college,” says Brendan Dougher, a partner at Florham Park, N.J.-based PricewaterhouseCoopers, which
specializes in IPO consulting. “The parents' job is to prepare Junior well enough to be successful on his or her own. Offering a
company to the public is no different.”
There are three key phases in the IPO process:
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http://www.alldownloadlinks.com/initial-public-offerings-ipo-an-international-perspective-of-ipos_112149.html
(This will assist researchers, academics, and graduate students to further understand the latest research on IPOs.)
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The Pros
Ease of raising funds for expansion.
The traditional means of financing for most SMEs is bank borrowings. An IPO provides an alternative to relying on bank funding and
frees the business from fixed repayment commitment. Once listed, dividends due to shareholders, if any, are declared at the discretion
of the management and the company is not subject to fixed payment terms.
Ability to conduct mergers and acquisition (M&A) activities using the company’s shares
as consideration.
Due to the enhanced liquidity of a listed company’s shares, the company is able to use its shares in place of cash as consideration for
the acquisition of a potential target company . Similarly, the market value of the company could form the basis of a valuation of the
company should the entrepreneur decide to sell his stake in his company, or merge his company with another.
The cons
The cons are related to the way the business will be conducted after a listing: