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Much Ado About Bubbles -- IPOs and Your Company |
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Social media giants like Facebook, Twitter, and LinkedIn have experienced unbelievable valuations last year. What do you need to know about your company and the IPO process? Here's some tips... |
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| Author: Lindsay Heidbrink |
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Over the last several months, three huge companies have been lambasted with negative coverage about their “bubble”-like status. You might have heard of them: LinkedIn, Twitter, and Facebook.
LinkedIn went public in January at a valuation of $4 billion, and has reached appraisals of over $8 billion. Twitter is undergoing scrutiny but received similar lofty valuation at around $7 billion. Facebook is the ship that left the stratosphere, however, with $100 billion as the considered worth of the company. Now the most important thing to consider is the actual revenue generated last year by these companies: Facebook at $4 billion, Twitter at around $150 million, and LinkedIn at $243 million.
Faced with those numbers, it’s easy to see the “bubble” factor—a giant, soapy valuation covering empty air inside. Though all three companies are profitable, the investment audience seems a bit overconfident in the valuations. This brings up the topic of IPOs and your company: what can they do for you, and how can they hurt you? Small businesses benefit from an inflow of capital to pay down debts or commence expansion, but the price comes in the form of significantly greater accounting regulation and exposure. For your company, here are a handful of tips to get you started…
1. Book building – Refers to the process of choosing a share price based on demand within a preselected group. As this is the most common form of share pricing, keep this in mind: the underwriting fees. These can come up to as much as 8% commissions on shares sold.
2. Auctioneering – Refers to the process of choosing a share price based on public auction; this is quite a rare practice, but saves significantly on underwriting fees and underpricing of shares. Keep this in mind: auctions receive less analyst coverage than book building.
3. Credit Ratings – Your company can get and promote a credit rating during an IPO. Keep this in mind: having an available credit rating does decrease the possibility of underpricing, but not substantially.
About Author
Lindsay Heidbrink attended Brigham Young University and received a BA in Communications: Public Relations. She currently works for Marketecture, a company that provides website construction/hosting. Visit http://www.Marketecture.com/ for more information. These articles are part of Marketecture’s continued efforts to help SMBs build a better business online. Lindsay likes reading, writing, painting, and scuba diving.
Article Source:
http://www.1888articles.com/author-lindsay-heidbrink-42855.html
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