Question

The Pros and Cons of IPOs

Instructions

Please watch the video below on the pros and cons of IPOs (Chapter 12).

SiliconANGLE. (Producer). (2012, October 12). Breaking analysis: Workday IPO - success or fail? [Video file].
Available at: https://youtu.be/poKa0S7AXZE (Links to an external site.)Links to an external site.

Summarize in a paragraph what you learned from the video.

Summarize in a paragraph the pros of IPOs.

Summarize in a paragraph the cons of IPOs

Answer 1

From the video I learned about different aspects of IPO and how a stock price can oscillate after getting listed. For example the video talks about Workday, a cloud-software company. Its IPO offering saw the stock to rise at a fast pace first only to settle back later. One very important thing that I learned from the video is that company should price their stocks that they are offering through the IPO properly. In this case the stocks of Workday were initially priced at $24 but this was later re-priced to $28 per share. As this was in the high end of the range the initial spurt in stock prices, after the listing, came down substantially.

Pros of IPO – One of the main advantages of going for an IPO are that helps the company to get sufficient funds. After the IPO a company becomes flush with capital and this can be used for expansion purposes. Secondly owners of the company become able to cash on their hard work that they had put in to establish and grow the company. IPO also opens more avenues for the company in the long run as it can attract top talent by offering them stock options.

Cons of IPO – First of all the entire process of IPO is expensive as well as time consuming. Secondly once a company becomes listed it will have to deal with large number of regulatory requirements, especially by SEC (Securities and Exchange Commission). Listed companies will have to meet the financial statement filing requirements of the SEC on a quarterly basis and also on an annual basis. Thirdly IPO will lead to loss of ownership control.