Initial Public Offering
In this paper the questions regarding a businesses decision to go public will be addressed. Recent changes such as Sarbanes-Oxley governance ruling have had significant impact on the planning and execution of IPO's however, going public still remains the best route to additional capital for a company. We will also take a look at Google's successful rollout of their public offering. However first we need to look at what it takes for a company to go public. In the text of the Fundamentals of Corporate Finance the initial description of IPO succinctly captures the essence of need and subsequent process of an IPO.
Firms issue shares of common stock to the public when they need to raise money. They typically engage investment banking firms such as Merrill Lynch or Goldman Sachs to help them market these shares. Sales of new stock by the firm are said to occur in the primary market. There are two types of primary market issues. In an initial public offering, or IPO, a company that has been privately owned sells stock to the public for the first time. Some IPO's have proved very popular with investors. (Brealey, Myers, and Marcus, 2004)
In his online article Martin Mannion aptly describes some of the thoughts and considerations of the IPO.
It's also easy for founders to think of the IPO as an end in itself. It can be a final liquidity event for the entrepreneurs who choose to reap the rewards and move on, and it's a typical exit route for funding partners such as venture capitalists and private-equity firms. However, an IPO is simply Day One of the rest of the company's existence, and founders who still run the firms they've taken public know all too well how critical it is to be completely prepared for the offering and for the days long after the ticker tape has settled. They also have firm opinions on the characteristics of the investing partners best suited to help growing companies go public....