Running Head: EBay Initial Public Offering of Skype
Angela L. Hunter
Module 01 - Case
Initial Public Offerings
Strategic Corporate Finance
Professor Dr. William Cheng
April 18, 2010
An Initial Public Offering (IPO) represents the first public sale of stock by a private company to allow outside investors to publicly purchase shares of stock from their company. They are often issued by a smaller, younger company that is seeking capital to expand. This process is done within the business world to raise capital by issuing either debt or equity. There are different scenarios that can take place when choosing an IPO. An IPO may obtain the assistance of an underwriting firm, which helps determine the type of security that is needed. This can be either common or preferred, depending on the best offering price and the timing of the market. When a company lists its shares it will invariably look into additional new share in order to raise capital. The money paid by the investors for the new shares goes to the company upfront, unlike a later trade of shares, where the funds are distributed between investors. This process allows a company to tap into a wide pool of the stock market investors to provide a large volume of capital for future growth. At no time is the company required to repay this capital, instead the new shareholders have the right to the future profits that are distributed by the company, and this is done through distribution of case dissolution.
It can serve as an exit strategy for a business owner or investors. It also, can make a private company make fortunes because their new stock can become worth more than the original investment. The main problem here is there is no guaranteed of what the outcome will be the whole process can be a risky investment. There can be several drawbacks from business owners. One drawback would be that you will not get your money out of the company as fast as you may...