Concepts
Rosetta Stone
Pros and Cons of an IPO
Advantages:
- Raise equity capital → fund operations, new projects, pay debt
- Initial investors: Opportunity to capitalize on their investment
- Publicity around IPO
Disadvantages:
- Underwriting fees (6% of issuance)
- Disperse ownership → Less control for “old” owners/founders
- (unknown)
- Increased pressure/scrutiny from shareholders
Size-up
External
Economy:
- Overall negative, post credit crisis (-)
- Stock market down 50%, very high expected MRP → approx. 7.5%! (-)
- In February and March of 2009 there had been some evidence of improvement in financial and economic conditions.
- The Stock had experienced a rally of more than 20% (+)
- US economists suggested that expected GDP growth will be positive on 2nd half of 2009 (+)
Industry:
- Fundamental question for the IPO and valuation: What industry???