Who detertimes how much a stock is worth when they 1st go public?
Tobie asks:
I have heard of IPO but how is the value determined and where does the money that the stock buyers go? who get paid what fees to get these transactions done?
I have heard of IPO but how is the value determined and where does the money that the stock buyers go? who get paid what fees to get these transactions done?
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it is determined by the people who sell the stocks
A company generally hires a large brokerage power house like Credit Suisse or Morgan Keegan etc.. to evaluate and come up with an initial price. However, at the public offering, the price is really depends on supply and demand. If the demand at that time is “high”, then the price would increase. For example, the price of the Google stocks. when they went public.
First the company’s share value is determined. They cannot sell in the same value as they wont get much money. so based on market conditions and company’s position in the field they will increase the value and its called as issue price.
The investment banker figures out what the offering price for the IPO should be.
The money goes to the company that went public. After all, they are ultimately the ones selling the shares.
The investment banker gets a fee. A huge fee, I might add.