Effi Enterprises was founded by Efraim Landa for the purpose of encouraging growth of emerging companies. One of the ways they achieve this is through IPOs. Effi Enterprises offer their expertise in this area as well as many other financial components of establishing a successful business.
Definition of IPO
When an investment banking firm takes a company public through raising investments, the transaction is called an Initial Public Offering, or IPO. Investment bankers are cautious about representing private companies and need to be assured that there is an adequate amount of public interest before proceeding. Their own fees will be based on the amount of capital the transaction will raise so they want to be certain it is worth opening the company up for private investing.
Advantages of an IPO
There are a wide variety of benefits that can be achieved through an Initial Public Offering. There is significant access granted to the investment capital and it fosters credibility because of the supporting interest of an investment banking firm. It will also provide the company, as well as the public investors with professional advice during the time of the transaction; and research reports and analyst coverage will be generated to ensure that the public remains informed. These will provide a strong base of public information that can be beneficial to the company later on. They can become excellent PR sources that help inform future investors about the health of the company.
Disadvantages of an IPO
There can be a few disadvantages of an IPO. For instance, it is more costly than a reverse merger transaction or a direct public offering. There will also be more need to form ways of keeping the investors informed such as having the additional responsibility of managing meetings or setting up conference calls. And the success of an IPO is largely dependent up on the investment banker as well as the current condition of the market.
Are there any costs for an IPO?
There are five basic fees that will be associated with an IPO. There are accounting and legal fees that will have to be covered. A professional adviser will assess a fee. And there are filing fees as well as financing fees that will be assessed. The fees associated with accounting, legalities, filing and the professional advisor will depend largely on the complexity and size of the transactions. It will typically cost in the thousands for an IPO, but it can cost up into the millions. The financing fees which will be charged will be based primarily on the funding that is raised through the investment banking firm.
Tips for Investing in IPOs
It is best to maintain a long term focus than to hope for a quick turnaround on investments. But even when staying focused on long term prospects a good IPO is difficult to find. Every type of investment has particular risks that are associated with it but IPOs are very different than investing in average stock. There are some things to keep in mind if an IPO is the desired choice. Firstly, you will need to do some research on the company, its financing, competitors and its industry health. It may be difficult at first to locate information, especially research data, since they have not been among public companies which are covered by analysts.
It is essential to read the prospectus. This will lay out the risks as well as opportunities of the company along with financial proposals for the money brought in through the IPO. Look for finances which are being distributed to fund research, expansions or marketing. Read objectively considering if the prospectus gives a balanced outlook concerning projections and financial earnings outcomes.
Effraim Landais very familiar with helping companies with an IPO. His own company Effi Enterprises works with companies to explore and obtain various types of financial investments. They specialize in helping emerging companies handle revenue as they continue to experience growth. One sign of marked business growth is when a company is going to go public. Something Facebook recently announced they would be doing with their stocks.
Facebook ‘s IPO
One of the questions that are posed to Effi Enterprises concerns when it’s time to go public. Companies are generally looking for a magic number to that then qualifies the private company for public investments. There really is no set number for revenue or profit that defines the “right” time to go public. Going public in actuality should be when the company is not desperate for finances. The company is no longer just trying to survive but is instead seeking funding to finance expansions or growth. Some are looking for public shares to help the company make acquisitions. Facebook is in the perfect spot to go public by this criterion.
In 2012, Facebook reported a 45% increase in revenue in the first quarter. In comparison, Google reported only a 22% increase in the same time frame. Going public could mean somewhere around $100 billion. Their goal is to raise $5 billion in the IPO, this is with the total valuation of around$100 million.
Going public may be a favorable way to generate revenue. There is no doubt that Facebook has value in the public eye. The question is if key investors will see the same value. When you look at the numbers it is astounding. Facebook will have approximately one tenth of the world’s population signed up. It is likely that no other business has had such a huge audience. Facebook already controls over a quarter of all online advertisements. That’s equal to about one sixth of the ad revenue generated in the United States. With numbers like that, why would investors in the private sector be hesitant to contribute? With its track record it is nearly a guaranteed successful venture.
Business analysts will state that while the ads are the biggest asset, they may very well also be their biggest risk factor. The trouble from here is continuing growth in this arena. The larger a company becomes the more difficult it can be to continue and sustain such monumental growth. Can they continue to build ad campaigns and keep their audience engaged? What about the possibility of overwhelming the users? These are real risks that Facebook must address to reduce the risk of losing rather than gaining. Facebook will need to convince potential investors that they can continue monetizing the millions of users.
What Facebook Says About Going Public With Shares
Facebook plans to offer 180,000,000 shares to the public. These are all Class A Common stock and in addition shareholders are offering 157,415,352. This is their IPO- initial public offering. Previously there has been no public market for Class A common stock. The IPO price should be set from $28 to $35 for each share.