What are the advantages and disadvantages of Rosetta Stone going public? The main advantages of Rosetta Stone going public are that an IPO would allow them the capital to expand their business into new markets as well as build on the Rosetta Stone brand. The IPO would also help them establish business credibility as a public firm. As a public company, Rosetta could enhance their image and reputation with newfound capital. It may also be advantageous to proceed with an IPO as the market has shown encouraging signs after the crisis of 2008. Changyou.com, a video game developer recently went public at 6.5 times EBITDA. Likewise, Bridgeport Education has recently considered going public and estimates that they could do so at a range of 10-12 times EBITDA. This may indicate that an IPO would behoove Rosetta Stone as it would be a successful business decision. Furthermore, the language learning industry largely consists of self-study learning as it counts for $32 billion of the $82 billion industry. Going public would allow Rosetta to be a major market presence in a booming industry. Another advantage of taking Rosetta Stone public is Adams’ concern of a takeover. Adams is worried that the limited amount of capital and resources they could get from private sources leave them vulnerable to a takeover. An IPO would quell those fears. There are, however, a few disadvantages associated with going public. For one, the process is quite arduous and would take three months at the minimum. Additionally, there is quite a bit of risk and uncertainty associated with taking a young firm like Rosetta Stone public, especially in such a volatile market. Despite these concerns, it may be advantageous to issue the IPO as analysts believe Rosetta is one of the few firms who would be successful going public. As exhibit 8 shows, taking the firm public would lead to increases in gross profit over the next several years. Thay have to disclose some private information to...
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