Initial Public Offerings (IPOs)

Many entrepreneurs and investors share the dream that, one day, they will ring the opening bell at the New York Stock Exchange NYSE and thereby mark the Initial Public Offering (IPO) of their company. However, raising equity from public investors is easier said than done. The purpose of this module is to take a closer look at public equity financing and the various ways firms have to tap into this source of financing. 

Useful Tools

The module proceeds as follows:

  1. The Introductory Chapter gives an outlook on the module as well as a brief overview of the market for public offerings.
     

  2. Next, we ask Why Firms Go Public? The chapter provides a detailed discussion of the various costs and benefits of going and being public.
     

  3. The most prominent route to public equity is the Initial Public Offering, IPO. The Chapter The IPO Process discusses in great details the relevant steps that bring privately held companies to public trading on a stock exchange. We use the IPO of Dropbox to illustrate the traditional underwriting process via bookbuilding, and we discuss a potential alternative pricing and allocation mechanisms via Dutch auction, using the Google IPO.
     

  4. Next we present a simple model to determine how an IPO affects the Value Allocation and Ownership of the company.
     

  5. Finally, we take a look at Alternative Going Public Strategies. Specifically, we discuss Direct Listings using the case of Spotify as well as Direct Public Offerings. This final chapter also takes a look at recent trends in public financing, including Crowd Financing and Initial Coin or Token Offerings (ICOs).