Question

In recent years, there have been several initial public offerings in the social media industry, such as Facebook, Instagram and SnapChat. Choose one of these companies and discuss how successful or unsuccessful the initial public offering was and how the stock is doing today. In addition, discuss if the offering was a primary or a secondary market transaction? Explain.

Answer 1

Initial public offerings means an act of offering the stock of a company on a public stock exchange for the first time.

The social networking company Facebook held its IPO on Friday, May 18, 2012. The IPO was the biggest in technology and one of the biggest in Internet history, with a peak market capitalization of over $104 billion and its share is priced at $38.

The current value of the share of the Facebook is $75.02 .

A primary offering is the first issuance of stock from a private company for public sale. This is the means by which a private company can raise equity capital through financial markets in order to expand its business operations. This can also include debt issuance. A primary offering is also known as an "initial public offering" (IPO)

Primary offerings are usually done to help a growing company expand its business operations, but it can also be done by a mature company that's still private. After the offering and receipt of the funds raised, securities are traded on the secondary market, where the company does not receive any money from the purchase and sale of the securities they previously issued.

A primary offering is a rite of passage for a growing successful company, as it goes from being private to being public and registered with the Securities and Exchange Commission (SEC). The SEC requires corporate issuers of primary offerings to file a registration statement and preliminary prospectus, which must contain the following information:

• A description of the issuer's business.
• Names and addresses of the key company officers, with salary and a 5 year business history on each.
• Amount of ownership by key officers.
• Company's capitalization and description of how the proceeds from the offering will be used.
• Any legal proceedings that the company is involved in.

The initial shares are usually purchased by a syndicate of underwriters, who then resell the shares to those who've received an allocation. Demand for IPO stocks often overwhelms supply because IPO stocks normally zoom higher, at least temporarily, once they start trading in the secondary market.

Public companies can choose to issue additional shares of stock after a primary offering. These are called secondary offerings. Secondary offerings increase the number of outstanding shares available for trade in the secondary market, thus diluting the value of each share. Large shareholders sometimes will create a secondary offering, but this does not create new stock and does not benefit the issuer.