IPO!! Everything you need to Know?
As the Saying Goes,
Ideas are a dime a dozen.
Acting on an idea though,
Can amke all the difference.
Say you turn your vision
Into a Startup.
It start’s small.
Then it get’s bigger.
Then it get’s even bigger.
Until one day,you may get to decide it’s time for your company to go public.
So,today we will talk about intial Public Offering.
IPO stand’s for intial public offering.It’s the very first Sale of stock issued by a company on the public market,which essentially mean’s you’re turning your private company into a public one.
So,when it’s a private, a company is normally owned by a small number of investor’s.That usually consist’s of people like you your friend’s or parent’s plus professional investor’s like a Venture capital firm.
Once the company goes public,you’re opening up that buissness to be owned by a large number of people.In effect,the firm goes from being owned by just a few people to potentially ten’s of thousand of shareholder’s.
To commemorate the event ,most stock exchange’s hold a ceremony of sort’s.At the new york and london stock exchange’s,you’ll ring the bell.
But At the hong Kong stock Exchange you’ll strike the gang.
So why go public?
Well,going public raises a lot of cash for a company.With that money,it become’s easier to scale and grow ,invest in infrastructure and attract top candidate’s.Plus, there the bragging right’s you get from being listed ona stock exchange.
It’s important to note that large companies can also stay private too.Ikea,Mars,Aldi and state farm are just some examsple’s of massive companie’s,that are private.After all,going public isn’t a simple process,normally taking about four month’s to complete.
The compnay will start with finding what’s as an underwriting firm.Typically an investment bank or several.If and when the firm take’s on the job they put the money to fund the IPO,essentially ‘buying the shares before they’re actually listed anywhere.
The firm work’s with the company to determine what type of security to issue,an offering price,the number of share’s and the optimum time to bring a company to the public market.
In the U.S,they also handle registering with the U.S securities and Exchange commision,which makes sure all of the financial information has been disclosed and is accurate.Then you’re finally good to go.
The underwriter goal is to sell share’s to the public for more than it is paid the company.After all,that’s how they make their money.
But going public can alos mean a nice payday for the business founder’s and early investor’s.You often hear about people becoming millionaire’s or even billionaire’s after their company goes public .
Here’s why?
If you’ve worked at a private company that’s intending to go public one day,sometime’s part of your compensation is given through equity,part-ownership of the firm.
It’s a way to hire talented people without a lot of cash upfront and if the company does go public,you get a piece of it at it’s new valuation.
Here’s an example.
When snapchat went public in 2017,it’s founder Even Speigel scored big.Speigel got a stock grant of $636 million when the company went public.
The following year,he sold more than 2.6 million shares.The sale of his stock was equivalent to $50 million.
The number of companies going public is constantly fluctuating.
Globally, 1764 companies floated in 2017, a nearly 50% increase since 2016 and the most IPO’s since 2007.And the most IPO’s 189 of 2017 IPO’s were in the US a 70% increase from the year before.
A few of the biggest IPO’s in history include Facebook,Visa, and General Motor’s.And in 2014,Alibaba smashed the record with it’s debut on the new york Exchange bringing in $25 billion.
All that said going public has it’s drawback Publicly traded companies are subject to oversight by regulator’s ,like US securities and exchange commission.And once you list your comapany on an exchange ,you’re not just reporting to yourself anymore,you answer to all your shareholders.
If you don’t make them happy you can be sidelined, or even fired from the company you founded.