The initials IPOs stand for – Initial Public Offer. This is the sale of the stock that is done for the first time by private companies to the members of the public. It is feature usually associated with smaller companies when they are seeking expansion capital. However, it can also take place in private large companies for the purpose of a public trade. IPOs can turn out being risky investments. As for individual investors, it is always hard to forecast the performance of the stock on the first day it is traded and also in the near future due to the fact that, the historical data on which to base the analysis of the company is not sufficient. Again you will find that most of the IPOs are for those companies experiencing an ephemeral growth and the future value of their status is uncertain.
When planning for an IPO, the company involved seeks the aid of underwriting firms which are faced with the role of determining the security type to issue and the best price as well as the best time to go public. This is because a bad timing may be detrimental to the company in present and in the future.
In the year 2012, there was an overall of 38 tech firms that had been listed with an IPO amounting to $100 million and above. The top IPOs tech sector in the year 2012 in a descending order included Facebook, Workday, ServiceNow, Palo Alto Networks, Splunk, Vantiv, Kayak, Guidewire Software, Ruckus Wireless, ExactTarget etc. Important to note is that, the firms whose investment returns have gone on increasing since they went public are the firms that had to a great deal focused on corporate users as well as business folk.
It is clear that hype does not always favor the company in the picture. Groupon was overwhelmingly on the press when it showed disrespect to the Google’s initial purchase offer. Instead of an upward growth, Groupon continued on a downward trend on the public path. Initially, this was seen as a brave move but the company is now faring on badly trading at half the initial price. This has left many with many questions. Zynga, which is a popular company for making computer games, is also another surprising disappointment of the recent past. In the mean time, RIM, LinkedIn and Jive are doing well trading on prices which are higher than what they made on their debut public appearance.
The top firms in the list were mainly enterprise software as well as cloud-focused firms, not the much-glorified consumer technology firms, except Kayak and Facebook. The other top firm in the IPO list was Yelp, which is going further down. Surprisingly, consumer Internet firms got most of the press attention, but it was the enterprise companies which continued to thrive in business.
Considering venture capital companies, as shown in Midas list and other sources, the ones that have experienced recent success did well. Sequoia Capital was recorded to have a strong stand throughout the year, taking the lead. Thirteen companies exited either through IPO or M&A. Bessemer Venture and Benchmark Capital recorded seven exits, Greylock recorded six exits, Insight Venture, GGV Capital, New Enterprise Associates and Accel Partners each recorded five exits. The figure recorded are however total value of the company and are not a true representative of the amount of capital received from exists by the venture firms.
Our main focus will be on the giant tech companies, looking into details how their experience in relation to the IPO has been. These are the companies that fight for relevance in the tech world. There are presently tremendous changes with the emergence of new companies which totally alter the trend and the rhythm already in place for the giant companies.
Looking at Facebook, its course on IPO can be described as having been unusual. It is a norm that majority of the technology companies that are on the early stages will most probably look for a buyer or just go public instantly. This has not been the case with Facebook; its main focus has been the creation of a firm foundation and the structuring of a business model. This move by Facebook is arguably a more mature approach but to some it implies a slowed potentiality in the growth of the business. However surrounded by uncertainty the move is also reflected in other companies. Reuters and Bloomberg are trying to battle with big names like Facebook whose IPOs are oversubscribed.
Investors reacted to some encouraging financial figures of the third quarter released by Facebook after the closure of the markets. It was reported to have made an adjustment on the earnings per share bringing it to 12 cents, beating harmonized earnings estimated by penny as well as seeing increased revenue of 32% totaling to $1.26 billion. The investors again were overjoyed when Facebook said that it had generated from mobile some $150 million in quarter three and this represented 14% of its revenue from advertising. Mark Zuckerberg the Facebook CEO said on a conference that he disputed the myth that making money through mobile was unachievable for Facebook. But all in all Facebook’s shares should still strive to regain their initial pricing of their IPO which was at $38. The rebound in stock will be a source of joy for the employees of Facebook who are soon waiting for the restrictions imposed on their stock withdrawn thus enabling them to sell after a very long wait.
Apple launched its Initial Public Offering (IPO) on December 12, 1980 where it sold shares totaling to 4.6 million at $22 per each share on NASDAQ market. Their shares sold at a very fast rate generating more capital compared to any other IPO since the one experienced by in 1956 by Ford Motor Company. Almost 300 millionaires with 40 of them being Apple employees as well as investors were created. This surpasses any number of millionaires any company has ever produced in history as at that time. Steve Jobs made a total of $217 million alone and was the biggest shareholder.
The stock went up from the year 2004 to mid of 2008. Apple ceased to rely on computers; instead they made an addition of consumer electronics which include such as iPhone and iPod to what they offered. The health of Steve Jobs and poor performance of the economy caused a drop in the stocks starting from the month of September 2008 to onset of 2009 recording a value as low as $82.33 in the month of January 2009. It then saw a recovery in the growth shooting up to $667 by September 2012.
Google received its first funding of US$100,000 in August 1998. This contribution was given by Andy Bechtolsheim who participated in the finding of the company Sun Microsystems. The contribution was given even before the incorporation of Google. In the early months of 1999, Page and Brin who at this time were graduate students saw that this search engine was consuming their time and thus affecting their academic pursuits. So they deemed it wise to approach George Bell the CEO for Excite where they offered to sell the whole idea to him at $1 million. Bell turned down the offer. Major funding was announced on June 7, 1999 which was initiated by big investors who included Sequoia Capital, Kleiner Perkins and Caufield & Byers raising money amounting to $25 million
The Initial Public Offering (IPO) for Google took place on the August 19, 2004. Larry Page, Eric Schmidt and Sergey Brin at this time agreed to join forces and focus on Google up to 2024 which is a period of 20 years. The company offered shares amounting to 9,605,052 at $85 each share. Credit Suisse and Morgan Stanley whom were the deal’s underwriters made a system that ensured a unique online auction. This saw a $1.67 billion sale of shares giving market capitalization for Google with a value exceeding $23 billion. Of the total shares offered, 271 million, the biggest percentage remaining was controlled by Google and these necessitated many of its employees to become instant millionaires. Google’s competitor, Yahoo, also benefited by owning Google’s shares totaling to 8.4 million before the actualization of the IPO.
Some people had the speculations that the IPO for Google would definitely bring changes to the culture of the company. The purported reasons varied from pressure of the shareholders for the benefits of the employees to be reduced to the issue of many executives in the company becoming instant millionaires. Larry Page and Sergey Brin, the co-founders addressed this concern by promising the investors that Google’s IPO would not alter anything as it concerned the culture of the company. However, in 2005, articles in media sources suggested that Google was losing its anti-corporate.
The unique culture of the company was to be maintained and this saw to the designation of a Chief Culture Officer. This person was also to serve as the Human Resources Director. The main purpose of this officer is to work on the development and maintenance of the company’s culture and also to create an environment conducive for the founding core values of the company. The company is also faced with allegations of ageism and sexism from its former employees.
Subsequent to the IPO, the performance of the stock went on very well. On 31 October 2007, shares hit a value of $700. This was attributed to the strong sales as well as the online earnings from market advertising. The individual investors are the one who fuelled this change, but not as many might associate this change to mutual funds and big institutional investors. Google is now listed under the symbol GOOG on the stock exchange NASDAQ and the symbol GGQ1under Frankfurt Stock Exchange.
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