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 bought 2 shares of
Amazon
when they went public in 1997, at their
IPO
price of $18 per share they would be worth approximately $22,782.24 today.
Tesla
went public at $17 per share in 2010. The stock is now worth 18 times that much. If you bought $2,000 worth of
Tesla
stock at $17 it would now be worth approximately $35,939.
Earlier this month,
Apple
became the first ever company to hit a market cap (basically the value of a companies outstanding shares) of $1 trillion. If you invested $990 in
Apple’s
IPO
in 1980, after multiple stock splits, the stock would have made you $521,740.80.
Like we said...kind of a big deal.
Have a great weekend Savvies!
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