Fin501 Module 1 Case Ipo's
Business and Management
Submitted By boopi19
Initial Public Offerings
In order to gain funds for their organization, companies use initial public offerings (IPOs) to introduce their first sale of stock to the market, which is available to investors. An IPO allows a company to tap a wide pool of investors to provide itself with capital for future growth, repayment of debt or working capital (Wikipedia.com). Avaya, a global leader in business communications and phone systems, is considering an IPO in the near future but is uncertain of which method of IPO to use. Since Avaya has been a publicly traded company in the past, and it’s recognized and established global brand has seen no hint of decline in its profits or popularity (thetelecomblog.com), it would be best for the company to use an auction based IPO.
Based on current analysis and findings, it would be best that the executives of Avaya Corporation use the auction based type of IPO because it could bring the highest profit per share to the company. Since the company has been publicly traded before, investors may already have knowledge of the company’s potential and bid higher for the shares. In return, Avaya could make more than anticipated if they were to set the value of the shares. In the auction based IPOs the bids are open to a larger investor pool, which include investors that have been in the business for decades and those that are new to the investing process. This expansion in investors can raise the bids higher because of the added competition in the auction bidding process.
While weighing the benefits and risks of each method, there were several components of the process that were considered before deciding which method was best for Avaya. The traditional method involves researching the likely market value of the company, and based on the research and the amount of capital the company wants to raise in the IPO, the company and the...