What do you think of the VISA IPO. Who is buying and who is not and why?
Monthly archive: December, 2006
From Start-up to Ipo and Beyond
Elton asks:
IPO is an acronym for Initial Public Offering. This is the first sale of stock by a company to the public. For this reason, doing an IPO is also referred to as “going public”. A company can raise money by issuing either debt (bonds) or equity. If the company has never issued equity to the public, it is known as an IPO.
Going public raises cash, and usually a lot of it. Being publicly traded also opens many financial doors:
- Because of the increased scrutiny, public companies can usually get better rates when they issue debt.
- As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of the deal.
- Trading in the open markets means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent.
Being on a major stock exchange caries a considerable amount of prestige. In the past, only private companies with strong fundamentals could qualify for an IPO and it wasn’t easy to get listed.
The internet boom changed all this. Firms no longer needed strong financials and a solid history to go public. Instead, IPOs were done by smaller start-ups seeking to expand their business. There’s nothing wrong with wanting to expand, but most of these firms had never made a profit and didn’t plan on being profitable any time soon. In cases like this, companies might be suspected of doing an IPO just to make the founders rich. This is known as an “exit strategy”, implying that there’s no desire to stick around and create value for shareholders. The IPO then becomes the end of the road rather than the beginning.
How can this happen? Remember: an IPO is just selling stock. It’s all about the sales job. If you can convince people to buy stock in your company, you can raise a lot of money. IPOs like this are extremely risky and should be avoided.
“The stock market wake-up call is still ringing, but the lesson is clear. True value lies in P-E ratios, revenue and profit growth, and market size. That is what sets the value for the ultimate product - the company itself”. (Phillip L. Currie; appeared in the San Jose Business Journal, June 30, 2000)
IPO is an acronym for Initial Public Offering. This is the first sale of stock by a company to the public. For this reason, doing an IPO is also referred to as “going public”. A company can raise money by issuing either debt (bonds) or equity. If the company has never issued equity to the public, it is known as an IPO.
Going public raises cash, and usually a lot of it. Being publicly traded also opens many financial doors:
- Because of the increased scrutiny, public companies can usually get better rates when they issue debt.
- As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of the deal.
- Trading in the open markets means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent.
Being on a major stock exchange caries a considerable amount of prestige. In the past, only private companies with strong fundamentals could qualify for an IPO and it wasn’t easy to get listed.
The internet boom changed all this. Firms no longer needed strong financials and a solid history to go public. Instead, IPOs were done by smaller start-ups seeking to expand their business. There’s nothing wrong with wanting to expand, but most of these firms had never made a profit and didn’t plan on being profitable any time soon. In cases like this, companies might be suspected of doing an IPO just to make the founders rich. This is known as an “exit strategy”, implying that there’s no desire to stick around and create value for shareholders. The IPO then becomes the end of the road rather than the beginning.
How can this happen? Remember: an IPO is just selling stock. It’s all about the sales job. If you can convince people to buy stock in your company, you can raise a lot of money. IPOs like this are extremely risky and should be avoided.
“The stock market wake-up call is still ringing, but the lesson is clear. True value lies in P-E ratios, revenue and profit growth, and market size. That is what sets the value for the ultimate product - the company itself”. (Phillip L. Currie; appeared in the San Jose Business Journal, June 30, 2000)
Ada Celebrates His Wealth on the Tunes of Nero
Marceline asks:
ADA throws party tonight to celebrate success of IPO and successfully proves himself as modern version of the Rome king- Nero.
When Rome was burning! There is an ancient story on how Nero- the king played fiddle – a musical instrument while the Rome was burning. Something similar happened today.
ADA rang the bell in morning to list his IPO and Indian investors who participated in large numbers to subscribe Reliance Power issue were crying whole day. More than 50 Lakh investors participated in this historic Initial Public Offer at the last count.
One should also not overlook the fact that the largest public issue in Indian stock market history also created records for over subscriptions.
However, when it got listed today, investor lost unparalleled wealth. At the last count, more than 17%. When the stock market closed, Reliance Power IPO closed at 372 compared to the issue price of Rs. 450. It has never happened in the history of Reliance group.
However, what is more surprising is that the promoter’s, Mr. Anil Ambani’s wealth increased by almost Rs. 38,000 crore. Mr. Ambani currently owns 45% of the Reliance Power in his personal companies and has invested at Rs. 10 per share in the company compared to other investors from whom they have taken Rs. 450 per share. Even at 372, he has generated a profit for himself of Rs. 272 per share. Can one beat it? When the entire stock market is burning, the Nero is enjoying.
To celebrate this unparalleled personal wealth creation, he arranged a party on Monday evening at his multistoried residence Sea Wind. The party was held at the 5th floor swimming pool side. The top cabinet of Mr. Ambani along with the merchant bankers, investment bankers, private equity types, movie stars and several dignitaries attended this party to celebrate the great success of Reliance Power IPO although more than 50 lakh investors have lost more than 17% of their wealth in this much hyped IPO which has brought bad name to the house of Reliance. Wine, whisky and seven star catering adorned the menu in the glittering ceremony.
This reminds one of Nero playing the fiddle while Rome kept on burning. However, here, there is a reason. Mr. Ambani benefited immensely although small investors lost. However, who cares for small investors in India?
ADA throws party tonight to celebrate success of IPO and successfully proves himself as modern version of the Rome king- Nero.
When Rome was burning! There is an ancient story on how Nero- the king played fiddle – a musical instrument while the Rome was burning. Something similar happened today.
ADA rang the bell in morning to list his IPO and Indian investors who participated in large numbers to subscribe Reliance Power issue were crying whole day. More than 50 Lakh investors participated in this historic Initial Public Offer at the last count.
One should also not overlook the fact that the largest public issue in Indian stock market history also created records for over subscriptions.
However, when it got listed today, investor lost unparalleled wealth. At the last count, more than 17%. When the stock market closed, Reliance Power IPO closed at 372 compared to the issue price of Rs. 450. It has never happened in the history of Reliance group.
However, what is more surprising is that the promoter’s, Mr. Anil Ambani’s wealth increased by almost Rs. 38,000 crore. Mr. Ambani currently owns 45% of the Reliance Power in his personal companies and has invested at Rs. 10 per share in the company compared to other investors from whom they have taken Rs. 450 per share. Even at 372, he has generated a profit for himself of Rs. 272 per share. Can one beat it? When the entire stock market is burning, the Nero is enjoying.
To celebrate this unparalleled personal wealth creation, he arranged a party on Monday evening at his multistoried residence Sea Wind. The party was held at the 5th floor swimming pool side. The top cabinet of Mr. Ambani along with the merchant bankers, investment bankers, private equity types, movie stars and several dignitaries attended this party to celebrate the great success of Reliance Power IPO although more than 50 lakh investors have lost more than 17% of their wealth in this much hyped IPO which has brought bad name to the house of Reliance. Wine, whisky and seven star catering adorned the menu in the glittering ceremony.
This reminds one of Nero playing the fiddle while Rome kept on burning. However, here, there is a reason. Mr. Ambani benefited immensely although small investors lost. However, who cares for small investors in India?
Need help with an IPO Chart?
Charlena asks:
I’ve been doing IPO charts and I’m still a little confused about it.
Are you suppose to do the processing which happens before the Input occurs etc.
I’ve been doing IPO charts and I’m still a little confused about it.
Are you suppose to do the processing which happens before the Input occurs etc.
Could someone do a sample one for me please?
Like for making Pancakes is one of the questions and I’m not sure on some of the aspects of the chart.
