Initial public offerings--going public

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Table of Contents
Executive Summary .......................................................................................................................... 3 Brief Introduction .............................................................................................................................. 4 Research Description and Objectives .................................................... Error! Bookmark not defined. Facebook as an IPO case study ............................................................. Error! Bookmark not defined. Recommendations ............................................................................................................................. 5 Reference .......................................................................................................................................... 6

Executive Summary

Every firm wants to have its growth of the business in the international market and also want to collect huge fund so that the firm can expand its business. Also every firm want to attract the customers and best talent to the industry and want to have the competitive advantage. Initial public offering is the only solution for it and it shows that potential for the business in the market and future growth. It is also a reward to the founders and the investors who made the business through hard work.

Brief Introduction

An initial public offering, generally described as IPO or stock market launch as first sale of the financial stock of the company to the public people. IPO is a type of public offering through which the fund is accumulated from the public for the future use of the company. Because of the Initial public offering the company which is now a private firm turns in to the public company. The initial public offering by the firm is done in order to raise expansion capital and it becomes publically traded company in the stock market. The firms who turns in to public from the private takes help from the investment banking to handle the asset and liabilities of the firm so that the investment and financial activities can be assess correctly, and also the value of share, and share price of the public firm (Goergen, M.; Khurshed, A.; Mudambi, R. 2007, 401419). The IPO process requires long term planning and execution with the best market environment. Going public is a very typical transformational process that need to focus on different business segments for the common goal. When a firm lists itself to the public exchange, the fund or money invested by the investors to the company directly goes to the firm account based on the condition of the later shared trade of the company by the investors. It is a equity for the firm in terms of sale of shares of common stock. IPO thus allows to the concern company to tap a wide pool of the investors to provide the capital by the investors for the firms future growth, working capital or repayment of the liabilities of the firm (Khurshed, A.; Mudambi, R., 2002, pp. 697706). Initial Public offering has the best use of it as to have the immediate impact on the earnings and it provides the increase in sales because of the increase in inventory of the firm or through accounts receivables. For example, the case of Facebook as latest biggest IPO in the world is the best example of the Initial public offering. Facebook sold 421,233,615 shares for the price of USD $38 and collected the biggest amount from the public in social networking industry. This report analyse the different aspects of the IPO for a firm that turn from private in to public.

Recommendations

It is recommended that the IPO must need to be issue when it seems the firm to be in a great going and have the potential customers on its way. IPO increases the saes of the firm and creates a good brand among the customers so it is highly recommended for the firm to go for IPO after a good interval of growth for the company.

Reference
1. Goergen, M.; Khurshed, A.; Mudambi, R. (2007). "The Long-run Performance of UK IPOs: Can it be Predicted?". Managerial Finance 33 (6): 401419 2. Khurshed, A.; Mudambi, R. (2002). "The Short Run Price Performance of Investment Trust IPOs on the UK Main Market". Applied Financial Economics 12 (10): 697706 3. Aggarwal, R., 1998, Stabilization Activities by Underwriters after New Offerings, Working Paper, Georgetown University. 4. Chen. H. and J. Ritter, 1998, The seven percent solution, Working Paper, University of Florida, Gainesville, FL. 5. Ellis, K, R. Michaely, and M. OHara, 1999a, When the underwriter is the market maker: An examination of trading in the IPO Aftermarket, Working Paper, Cornell University, Ithaca NY. 6. Ellis, K, R. Michaely, and M. OHara, 1999b, The market microstructure of IPOs, Work in progress, Cornell University, Ithaca NY. 7. Michaely, R. and K. Womack, 1998, Conflict of interest and the credibility of underwriter Working Paper, Cornell University, Ithaca NY. 8. Ritter, J., 1991, "The Long-Run Performance of Initial Public Offerings," Journal of Finance 46, 3-27. 9. Facebook boosts number of shares on offer by 25%". BBC News. May 16, 2012.