While many of you may know exactly what an
Initial Public Offering (IPO)
is, we’re about to drop some jewels...cause that’s how we do!
An
Initial Public Offering
is when a private company issues shares of stock that the public can purchase for the first time. Technically, any sale of securities (a lux term for shares of stock or other financial instruments) to more than 35 people is considered a public offering.
Younger companies needing a little dough to expand and blow up will have an
IPO
and more established companies that have private investors can also do one too. Major reasons companies decide to “go public” include:
- Cash – It’s worth mentioning again that expansion, especially in a major way, takes some cheddar.
- Street cred – Going public can be seen as super next level for a company. It means the company is kind of a big deal and this can be attractive to potential customers.
- Liquidity – An IPO allows a company’s employees to eventually sell their shares and often their shares can worth more than their salary.
Some
IPOs
have been Cinderella stories for investors, complete with glass slippers and a carriage...
If you invested $100 in
Amazon
when they went public in 1997, at their
IPO
price of $18, you would have been able to buy 5 shares. With the multiple splits the stock has undergone, you would actually own 60 shares as of August 31, 2018 and they would be worth $120,762.
Amazon’s
stock price has gone down a little since August (about $181), but even with the decline the gains since 1997 are a nice chunk of change.
Tesla
went public at $17 per share in 2010. If you bought $2,000 worth of
Tesla
stock at the IPO price, you would have had 117 shares. Those shares would now be worth approximately $31,798.
Wall Street nerds recently valued
Uber
at $120 billion. This doubles the last valuation of the company just two months ago. These Wall Street proposals are the initial steps before an
IPO
.
Lyft
hired J.P. Morgan to conduct their future
IPO
and they valued the company at $15 billion. This makes things very interesting.
We expect both ride share companies to
IPO
in 2019. We will keep you posted!!!
Have a great weekend Savvies!
What topic would you like the StocSavvy team to Glamsplain?
