To Sink or Swim When Floating Stock
On Going Public
Cantillo Simón, Miguel; Corbishley, Nicholas
Date: Second Quarter 2012
Tags: IPO, Facebook, initial public offering, stock market, equity
While it's understandable why some companies, like Facebook, might choose to go public at this stage of their growth, the IPO process itself is costly and time-consuming, and can transform a firm beyond recognition. Facebook's lackluster debut, in May 2012, has only reinforced longstanding concerns that IPOs are primarily being used to enrich a select few within the investment banking community along with their most prized clients, often at the expense of the very companies that the banks are being paid to take public. This article discusses the motivations behind IPOs, how they work in practice, what companies can hope to gain from going public, and, just as importantly, the risks they might face by doing so. It also examines the current state of play in the IPO markets, as well as the possibility of another dot-com bubble taking shape.
Tools and Frameworks:
> "IPOs´ Evolving History" charts how IPO activity has evolved through three key stages.
> "Global IPOs by Region" shows how Asia is leading global activity both in terms of the number of deals as well as capital raised.
Facebook, LinkedIn, UPS, Google, Goldman Sachs, Pandora, Zynga, Groupon, Boston Beer Company, Glencore, Manchester United, Prada, Jumpstart Our Business Start-ups (JOBS) Act, Sarbanes-Oxley Act
Based on the authors' areas of interest in corporate finance and financial history.
About the Authors:
Miguel Cantillo is an associate professor of Financial Management at IESE Business School.
Nicholas Corbishley is a British lecturer and journalist who contributes regularly to the IESE Insight portal and magazine.