Mah4546 From Sweden, joined Jan 2001, 31117 posts, RR: 74 Reply 2, posted (11 years 3 months 1 week 2 days 21 hours ago) and read 2361 times:
Why did eBay go public when they were very succsesful (and they still are one of the few very succsesful dot-coms)? As stated, it is an additional source of revenue. Also increases awareness of the company, though that is not a primary reason.
174thfwff From , joined Dec 1969, posts, RR: Reply 6, posted (11 years 3 months 1 week 2 days 18 hours ago) and read 2275 times:
The initial public offering, or IPO, is a watershed event in the life of a company, and today's superheated IPO market makes this possibility a potential reality for more companies than ever before. Although few corporate events can create the euphoria or match the satisfaction associated with a successful IPO, going public is also a complex, demanding, time-consuming and expensive process. The consequences of the decision to go public are enormous. This article is in no sense a legal road map to the IPO. Its aim is to merely set forth six principles that, if observed, are likely to significantly increase the probability of achieving a successful IPO.
Approach the IPO as a beginning, not an end. A critical mistake, too often made by the management of public companies, is to think of the IPO as an end in itself. It is not. Going public carries with it consequences that endure for years beyond the actual date of the IPO, such as the liability of directors and certain officers for any material omission or misstatement in the prospectus.
Being a public company carries with it a set of new and extensive demands, including making periodic public disclosures or financial and other information. The management of public companies operate in a "fish bowl," accountable to public stockholders, Wall Street analysts and institutional money managers. If liquidity is the primary motivation for an IPO, alternatives such as a sale or merger warrant careful consideration.
Beware the premature IPO. Especially in today's red-hot IPO market, management must resist the temptation to go public too soon. Unsophisticated or poorly advised companies in very early stages of development can fall prey to the siren song of low-grade investment banking firms promising liquidity for management and access to desperately needed capital.
An early-stage IPO should not be undertaken without the backing of a reputable underwriter and the advice of sophisticated legal counsel. Moreover, an IPO should not be undertaken as a financing alternative of last resort, after efforts to obtain private equity such as venture capital have failed. If a company is unable to secure private capital, management should carefully consider the reasons why, and whether their business model makes any more sense as a stand-alone public company.
Select the right investment banker. Ultimately, the success or failure of the IPO will depend on the ability of the company's investment bankers to successfully market the company's securities, especially in turbulent financial markets. Selection criteria for investment bankers should include, among other things, reputation, industry expertise, strength of industry analysts, distribution channels, aftermarket price performance and post-offering services. Choose your law and accounting firms carefully. The difference between a smoothly run IPO and an IPO that becomes bogged down, perhaps missing a crucial market window, often can be attributed to the strength of the company's lawyers and accountants. The company's law firm quarterbacks the entire IPO process and should be experienced with public offerings and public company representation.
In many cases, the law firm that has served the company well as a private company may not be nearly so well suited to handle the company's needs in the IPO and beyond. Without appropriate leadership, the IPO process will flounder, lending to delays in meeting demanding schedules, frustration and added expense or worse.
Prepare early and set appropriate expectations. The secret of a successful IPO lies in good preparation and a realistic understanding of the process by all concerned. For some items, such as pricing of stock options, preparation should begin at least a year before the anticipated IPO date. Other matters to consider before an IPO include timing of option exercises by officers, loans to officers, the need or desire to reincorporate in a more favorable jurisdiction, and the adoption of protective or anti-takeover provisions. Understand the risks. From a legal perspective, few -- if any -- corporate events involve more potential liability than an IPO. All too familiar is the scenario of an IPO followed sometime later by a quarterly financial shortfall, followed by a plaintiff's class-action securities fraud lawsuit. Irrespective of whether those named as defendants -- the list always includes the chief executive officer and chief financial officer, all directors and the investment bankers -- are actually liable, such lawsuits are demoralizing, distracting and expensive. The prospectus should tell the company's story well, but it must do more. It must adequately and completely convey the risks associated with an investment in the company.
Cch362 From United States of America, joined Apr 2001, 147 posts, RR: 0 Reply 7, posted (11 years 3 months 1 week 2 days 18 hours ago) and read 2246 times:
By going public, the financial risks of running JetBlue is transferred from the venture capitalists who put the initial money that started it, to all individuals who will buy stock in JetBlue.
When parts of the company are "sold" to public investors, the venture capitalists recover the money they originally risked, plus gains they get to keep as profit, plus additional capital to be used by the airline. Exactly how much gain they keep for themselves and for the company is determined by how much the public is willing to pay per share of stock. As long as they keep at least 51 pecent of the stock for themselves, they retain control of the company. This is exactly how venture capitalists earn their living. It is an expected step in the business life cycle.
Perception means a lot. JetBlue's "success" is actually undetermined. No one knows whether or not it is making money, and if so, how much. As a privately-held company, it never needed to release financial and operational statistics. JetBlue started with the largest capital backing ever, so even if it continues to lose money it could very well expand to create the perception that it is doing well.
The point is NOT that JetBlue is losing money. The point is that we don't know if they are or not or by how much.
But the common perception is that JetBlue is doing well, so why not for the venture capitalists to cash out now.