Stock Market Unit: where shares of stock are bought and sold http://www.investopedia.com/university/ipo/default.asp
What is a stock? • Stock: • Ownership in a public company • You own a % of the company • Also known as a Security • But…. • You have no say in business operations • You make or lose money based on the increasing / decreasing of the stock price
What is an IPO? • Initial Public Offering • is the first sale of stockby a company to the public • As an investor, your goal is to ‘GET IN EARLY”….
Why Go Public? • Going public raises CASH and usually a lot of it. Being publicly traded also opens many financial doors • A world of investors are now giving you Cash to make your company bigger, stronger, more powerful. • You can make more of your product, hire more people, develop your product better, etc…. • Trading in the open markets means liquidity.
WHO IS GOING PUBLIC NOW?? • Set www.marketwatch.com to your Favorites • http://www.marketwatch.com/tools/ipo/ipoCenter.asp?v=2&siteid=mktw
Companies fall into two broad categories 1. PRIVATE • A privately held co. is in business to make $ for the owner(s) • Most small businesses are private • But large companies can be private too. • Did you know that IKEA, Domino's Pizza and Hallmark Cards are all private?
2. Public companies: on the SM • Public companies have thousands of shareholders that can buy or sell shares of ownership of the co. • It is an investment for them bc they believe this co. is going to make them money • They have no say in business operations, it is a risk they take to make $ • Must follow strict rules and regulations set by the government • They are governed by a board of directors
IPO’s • Google at IPO: $85.00 • Today: $_______ • Microsoft at IPO: $21.00 • Today: $______ • IF you bought 1 share at the $21.00 IPO price, today you'd have 288 shares worth $8,331. • Collectively, the shares sold in Microsoft's IPO cost investors $58.7 million and, even at today's drastically reduced post-bubble prices, are worth $22.9 billion. Stock has split 288 times
The process to go Public • Private Company has to hire to propose to the GOV’T that they want to go Public…. • Investment Firms: Deutsche Bank, J.P. Morgan, Morgan Stanley • The SEC: The Securities and Exchange Commission: the government “police” of public companies • Makes sure that public companies are operation their business ethically and legally
You will be assigned an Underwriter • Professional who will help you write the proposal
2. The Proposal contains the following info: • financial statements for the life of the company • management background • any legal problems • where the money is to be used once they go public
3. If the SEC approves your proposal, an IPO price needs to be decided • It depends on the size of company, the success of the company, current market conditions, and what your competitor is trading at.