Welcome to IPO's Guide
Initial Ipo Offering Public 20 Article
. For a permanent link to this article, or to bookmark it for further reading, click here.
An In-Depth Analysis of Initial Public Offering: IPO versus Business Loans
from:
Supposedly you are one of the members of the board of directors of a certain company. The board realized that there is a need for additional capital infusion since the company registers a consistent growth rate in terms of production and marketing aspects. Such growth needs to be addressed in order to avoid later problems that may even result to the mismanagement of the company and possible bankruptcy instead of a progressive corporate output.
There are various suggestions raised by your colleagues. Some suggest that since the company has enough funds, it could be used to finance a business loan that will be used to sustain the company’s growth. Others suggest that the company must go public in order to attract several investors who will infuse the needed capital for the growing operation of the company.
As a member of the board of directors, which way will you pursue? Remember that there are two options that the company can take—first is entering into a loan agreement wherein you need to present any corporate assets as security to the loan. Second, the company could be listed into an IPO or initial public offering, determine the number of shares that the company wants to sell to the public, and the rest will just follow. Both options can raise revenues, yet the question will not just be about generating additional revenues at all.
The question will now be like this: “Which of them provides an advantage to the company and its stakeholders?”
Let us scrutinize the options carefully by going through the first option. The process is simple: once the company found a lending institution that will agree to lend the company with the needed amount, the company through its high executives and officials will enter a contract with a lending company and make an agreement on the conditions prior to the approval of the loan. It will include securing any company assets with equivalent value of the loan against the company and monthly repayments within a specified period of time with applied interest.
The second option will involve the initial sale of the company’s common shares to the public. The company will undergo the IPO process under its governing laws, particularly the Federal Securities Act of 1993 and the governing bodies (such as the Securities and Exchange Commission and the exchange where the common shares of the company are currently listed). Typically, you will spend more or less than $1 million in the whole process, but the initial return of investment is higher than your expenses, since the underwriters (composed of several investment banks) will sell the shares to interested investors higher than its market value.
If you will compare the two options, definitely the initial cost is higher when the company undergoes IPO. The return of investment has yet to be seen after the completion of the process. In other words, you will be spending first before you earned the revenues that you need. It is contrast with securing a loan since you will be able to get the borrowed capital even before you make any repayments. You will be able to use the funds immediately after the released of the approved loan money.
However, the loan will now be on the “negative” side once you will make repayments to the loan that you availed. Remember that once you failed or faltered on the conditions agreed on the loan, the collateral, which is your company’s assets, will be automatically taken away by the lender. In IPO, the assets will not be at risk. Instead, such assets will increase because of additional capital raised through IPO.
The choice between an IPO and a business loan is up to you. Scrutinize the given options and make the right choice.
Initial Ipo Offering Public 20 Specific links
Initial Ipo Offering Public 20 News
A look at how some IPO stocks have fared
Facebook raised $16 billion in its initial public offering Thursday, pricing its stock at $38 per share. Its public debut was the most anticipated tech IPO since Google went public in August 2004. After ...
Read more...Facebook Waited Too Long to Go Public: Initial IPO Reactions
Facebook shares started trading on Friday at a premium of $43, making a strong stock market debut. The social network shares opened at over ten percent higher than its planned IPO price of $38. But almost as quickly the early … Continue reading → Facebook Waited Too Long to Go Public: Initial IPO Reactions is a post from: SiliconANGLE We're now available on the Kindle! Subscribe today .
Read more...Historic Facebook debut falls flat
SAN FRANCISCO (Reuters) - The historic initial public offering of Facebook Inc did not go as planned on Friday, as the social networking company's sky-high valuation combined with trading glitches left the stock languishing near its offering price at the market close. Facebook shares began trading late Friday morning and opened 11 percent above the $38 offering price, but after peaking at about ...
Read more...Facebook Facts, Stats and Trivia for Future Jeopardy Contestants
The countdown continues to Facebook's initial public offering tomorrow, and the facts, trivia and stats about the social network continue to pour in ? beyond the 20 Talking Points about the company and IPO I've already put together from Facebook's prospectus.
Read more...Historic Facebook debut falls short of expectations
SAN FRANCISCO (May 19): The historic initial public offering (IPO) of Facebook Inc did not go as planned on Friday,...
Read more...