Running Head: Initial Public Offering
Touro University
FIN 501
Case Assignment
Module 1
Dr. Weinraub
Introduction
Google's controversial IPO in 2004 generated much interest not only because of its global name recognition, but also because of its use of the Dutch auction method in pricing and selling its offering. While the IPO was seen by some as a success, the company's shares today are selling near $200—a closer examination of the results raises questions about the benefits of the auction process to issuing companies. (Gelsi, 2005) What can companies considering IPOs learn from the Google experience? Should a corporation follow Google’s model of raising capital through online auctions? Much of the analysis throughout the Google IPO process has concluded that the Dutch auction is a flawed way to float shares. I tend to disagree. Done correctly, the Dutch auction provides an efficient and effective mechanism that endogenously determines a share price where supply equals demand.
An Initial Public Offering is the first sale of stock by a private company to the public. This occurs on the primary market. A company takes on an enormous amount of pressure going public. Due to the lack of historical data, a company's first day of trading is unpredictable. In this paper we will briefly discuss the financing issues that come about when a company goes public. There are many items to be aware of when a company makes this decision to go public. A company needs to understand the process of issuing securities, ways to advertise the stock before it is sold, getting the names straight on the newly issued stocks, the basics of underwriting and the different types of underwriting agreements. These are the staples that an organization needs to be informed on in order to start successfully (wikipedia,2006)
Functions of the Investment Banker
Today, investment banks (or investment houses) are, together...