The IPO market isn’t a market in and of itself, but rather a phrase used to describe investors’ appetite for new IPOs.
In much the same way you might say that the poor economy leads to a weak “job market,” a poor economy also leads to a weak “IPO market,” since fewer companies want to IPO when investors aren’t interested in making risky bets.
This week I wanted to touch on the IPO process, and how companies sell their stock to the public. With the IPO being one of the more important events in the financial markets, you should understand the IPO process inside and out.
First of all, we need to understand what an IPO actually is. The acronym IPO stands for “initial public offering,” which means “the first time stock is sold to the public.” The public, in this example, is average investors who can buy and sell stock on the stock markets.
The financial media is abuzz with stories about how LinkedIN’s IPO went sour. According to these stories, LinkedIN sold stock too cheaply to investment banks who would take it public the next day, selling its shares for only $45 just one day before the stock popped 100% to more than $90 per share.
Extrapolating out the sales price vs. the price on the open market during the IPO, it’s easy to see that LinkedIN lost millions of dollars in selling their shares cheaply, but did they really?
Last year this blog profiled GameFly, a then small videogame rental service which worked very much like Netflix. That post, published last October, followed GameFly’s announcement that they would be going public to raise funds. As an investor, I couldn’t be happier. The model is great, the business is great, and it is certain that Wall Street would send it roaring during this current dotcom boom.
But where are we now?
You’ve probably encountered Zillow before, either while searching for an address, a home for sale, or for the sake of getting a computerized appraisal for your home. Zillow is an online real estate database, and soon enough the company hopes to turn the latest dot com boom into a spectacular IPO.
As we look at how different web 2.0 businesses make money, especially in light of new IPOs, I thought it might be important to examine how Facebook makes money, and how it will continue to grow revenue in an industry that is very much unprofitable.
Everyone seems to be baffled about how Twitter makes money; it seems a site with so few ads and virtually no space dedicated to anything other than tweets and profiles couldn’t be that profitable. And compare Twitter to its cousin, Facebook; they have very little in common, especially when we start dissecting how each company makes money.
The hottest thing since sliced bread may soon be coming to a stock market near you: Groupon. The company, which is attributed with the title of the fastest-growing company in history, may be due for an IPO. As for how to value a future Groupon IPO, no one really knows.
LinkedIn has filed for an IPO. That attracted some interest, obviously, but it was only due to the fact that it is a social network.
LinkedIn will be the pre-Facebook IPO, something to watch to get an idea for Facebook’s IPO at a later date, just like investors watched Mastercard after it followed Visa into an IPO. While that makes sense, I don’t think it is even worth following by itself.
There’s a lot of talk online and offline about the growth of Facebook, and concerns about its influence on the web and Google’s profits. The concern is that Facebook, now the most popular site in the world, will dominate Google in driving visitors to their new favorite sites. That used to be Google’s job… Read more…
The credit card company Visa will IPO sometime around March 20th to raise around $19 Billion. While this would be a good chance for the company to raise more capital, it looks like a selloff rather than an attempt to raise money. Read more…
What is a IPO? A Initial public offering (IPO) is when a company goes public to raise funds by letting the public investors invest in their company. You are able to find these companies listed on the New York Stock Exchange, NASDAQ, and other public exchanges. Read more…
