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Finance: What Does It Mean to "Go Public"? 94 Views
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Description:
What does it mean to "go public?" An IPO raises cash in the form of equity, usually, for investors. When public, a company exists under SEC dominion, and must follow and file a forest-worth of paperwork: 10Qs, 10Ks, Annual reports, 8Ks, and myriad other really boring documents.
- Social Studies / Finance
- Life Skills / Personal Finance
- Finance / Personal Finance
- Courses / Finance Concepts
- Finance / Finance Definitions
- Life Skills / Finance Definitions
- Finance / Financial Responsibility
- College and Career / Personal Finance
- Subjects / Finance and Economics
- Finance and Economics / Terms and Concepts
- Terms and Concepts / Board of Directors
- Terms and Concepts / Company Management
- Terms and Concepts / Company Valuation
- Terms and Concepts / Entrepreneur
- Terms and Concepts / Incorporation
- Terms and Concepts / Investing
- Terms and Concepts / IPO
- Terms and Concepts / Marketing
- Terms and Concepts / Regulations
- Terms and Concepts / Stocks
Transcript
- 00:02
Finance a la shmoop what does it mean to go public and to be
- 00:09
clear this is not about going in public that sort of thing can give you 30 days [Man urinating in public and officer arrests him]
- 00:13
in the county jail this is about taking your company public and pretty much all
- 00:18
companies start out as private, well they have a small handful of little investors [seven dwarves bringing bags of money to poisonapple.com]
- 00:22
they don't need tons of capital to get going and they're not really subject to
Full Transcript
- 00:26
deep complex federal laws and regulations but companies grow up and typically have
- 00:31
their sights set on larger markets more complex and expensive products and
- 00:36
broader distribution power and for most companies that requires raising outside [Man holding up a share from a cart]
- 00:40
capital big capital additionally most early investors want to be able to sell
- 00:45
at least some of their shares likely at a huge profit and have what's called
- 00:50
liquidity i.e turning their private difficult to sell shares into easy to
- 00:55
sell liquid shares in a public company meaning that if they want to sell some [Man on cellphone outside Morgan Stanley building]
- 01:00
shares all they have to do is call Schwab or Fdelity or Morgan Stanley or
- 01:03
whoever and yell sell Mortimer sell into the phone which is really weird anytime
- 01:08
[Man yelling sell Mortimer to another man on a cellphone] the guy's name isn't Mortimer but you get the idea so when a company goes
- 01:12
public it means that they have agreed to follow federal laws and regulations
- 01:16
things like adhering to standard accounting practices called GAAP they
- 01:21
agree to file financial reports in a standard format that conforms to the way
- 01:25
in which everyone else files they agree to have a board of directors and so on [woman using a sewing machine]
- 01:29
so yeah there's a downside too a private company sometimes dilutes itself by
- 01:33
printing more shares that they can sell to the public like suppose organic
- 01:38
muffin group Inc has a total of 80 million shares and it's totally private [Man eating muffins in Organic Muffin Group Inc]
- 01:42
well the company decides for whatever reason it wants to go public and it'll
- 01:47
sell twenty million shares to new investors you know Ma, Pa Kettle, Joe [Company selling shares to new investors]
- 01:51
Sixpack err Moisha Cardiologist yeah well once the company has buyers for those 20
- 01:57
million shares it begins to trade publicly now having sold 20 million
- 02:00
shares that err say 15 bucks a share so OMG oops didn't think that one
- 02:05
through now the company has a hundred million shares total outstanding and
- 02:10
just raised 300 million dollars in cash - well the total value of the company is [total value of company on chalkboard]
- 02:15
a hundred million shares times 15 bucks or 1.5 billion dollars but now it's
- 02:21
public so it shares our liquidly traded ie anyone can now buy shares of the [dog running from building with a bag of money]
- 02:25
thing the early investors and founders can sell their shares after what's
- 02:29
usually a six month the cooling period the moral of story going public can be a [Men sat waiting in a 6 month cooling period area]
- 02:33
good thing for everyone involved both the company its commission taking
- 02:37
bankers and all of that companies investors going in public however is [Company, Banker and Investor all smiling]
- 02:43
only good for the guy with a cell phone camera and a YouTube account
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