My Research on Initial Public Offerings

December 26, 2017 Accounting

As I began to do research on IPO’s, I wanted to make sure that I had a clear understanding of what exactly an IPO was. Initial Public Offering can be defined as the first sale of stock by a formerly private company. An IPO (Initial Public Offering) can be used by either small or large companies to raise expansion capital and become publicly traded enterprises. Many companies that undertake an IPO also request the assistance of an Investment Banking firm acting in the capacity of an underwriter to help them correctly asses the value of their shares, that is, the share price. ttp://www. ipoinitialpublicofferings. com/ipo-definitions. htm#Initial_Public_Offering2 The going public process is an expensive consideration, and even more so for small cash-strapped young companies. When a company is contemplating the IPO process of going public, it must consider the pros and cons involved in making that decision, coached by its IPO advisors and others underwriting an IPO. Additionally, there are new responsibilities involved when a private company becomes a publicly traded business.

Although many benefits can ensue from going public and the related IPO services, the company directors and principals must critically judge all the options and impending tasks of becoming a public company. The direct IPO process requires pertinent considerations that need be touched upon with the help of an experienced securities attorney; he can help your company evaluate the advantages and disadvantages of an Initial Public Offering (IPO). The following analysis on how to do an IPO is in order to help you make a decision that is best suited for your enterprise.

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With the above information, I choose to write about “Groupon”, the fast growing digital coupon service. Groupon, a name that blends “group” and “coupon,” presents an online audience with deep discounts on a product or service. Act now, says the pitch: You have only so many hours before this offer expires. That’s a familiar come-on, but it’s coupled with a novel element: You get the deal only if a certain number of fellow citizens buy the same thing on the same day. It’s a cents-off coupon married to a Friday-after-Thanksgiving shopping frenzy.

What’s in it for the vendor–which might be a museum, a yoga studio or an ice cream shop? Exposure. Since the resulting revenue is not only discounted but shared (typically, 50/50) with Groupon, the vendor may scarcely break even on the incremental sales. But it now has customers who might never have thought of patronizing the business. Groupon gets its offers in front of eyeballs by buying ad space through Google ( GOOG – news – people ) and Facebook and via the word of mouth of its 13 million subscribers. Meet The Fastest Growing Company Ever, Christopher Steiner, 08. 12. 0, 03:40 PM EDT, Forbes Magazine dated August 30, 2010 Groupon as any other company choosing to go public must go through the SEC. The mission of the U. S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. However as Groupon was preparing to file with the SEC they chose to use a controversial accounting method known as ACSOI which stands for adjusted consolidated segment operating income. Critics of ACSOI claim it doesn’t include important business operating costs such as online marketing expenses to attract new customers.

That makes Groupon’s income statements inaccurate, they said. Under this method of accounting Groupon’s consolidated operating income produced positive figures of $60. 6 million and $81. 6 million for 2010 and the first quarter of 2011, respectively. But on a GAAP basis, the company actually generated operating losses of $420. 3 million and $117. 1 million during those periods. Instead of ACSOI, Groupon is now featuring two GAAP-approved metrics on page three of its prospectus: gross profit and consolidated segment operating income, minus the “adjusted. CSOI is negative; the company had a CSOI loss of $181 million in 2010 and a loss of $160. 6 million in the first half of 2011. It also uses one non-GAAP measure that isn’t unusual at all for unprofitable companies: free cash flow, which generated $72. 2 million and $36. 8 million in 2010 and the first half of 2011, respectively. -By Lynn Cowan, Dow Jones Newswires; 301-270-0323; lynn. [email protected] com –Nathalie Tadena contributed to this article. After going through the hurdle of using GAAP and some non essential accounting format Groupon needed investor before going public.

To my surprise, while the country if going through a recession, Groupon had several companies/ individuals lined up too invest in this endeavor. It appears without hesitation the investors came running in. The following paragraph is an excerpt from the edition of the Wall Street Journal. In January, Groupon announced it clinched a whopping round of fund raising that gave Groupon a cash cushion (and money for early investor to cash out some of their shares). Remember this cash flotation device came after Groupon

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