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Hop in Food

In: Business and Management

Submitted By tmor433
Words 435
Pages 2
Hop-In Food Stores Inc. is a successful, regional convenience-food store chain. Within 10 years and 84 stores later, the company was able to grow at a 55-percent annual rate. Using the strategy of growth by acquisition worked for a while for the company and helped generate sufficient revenues, but now new measures need to be taken to generate funds.
When Mr. Merriman is choosing a set price for Hop-In Food Stores Incorporated’s initial public offering, several factors should come into the decision. First, the choices of the company and the company’s characteristics are vital in the decision. Understanding what the firm owns and holds in debt will help to establish a value on Hop-In Food Stores. This provides a big link between the value of the company and how much more capital you would like to raise and will be able to raise. Underwriting is also an important aspect of IPO’s because it allows the company to realize what the demand is and how the company can meet it.
Looking at past IPO’s of similar companies will also give a good idea as to what was used, why it was used and what went wrong. The risks of pricing the stock too high can cause low share amount purchases by the public, unbalanced books, and insufficient amount of capital that Hop-In Foods was hoping to raise. Additionally overpricing leaves room for the market for their shares to not develop. This leaves needed capital that isn’t available to expand the company and continue generating revenues. Overpricing would cause an eventual fall in the price of Hop-In’s stock and a possible loss that your company cannot afford.
If prices were to be underpriced, the possible risks the company could face are just as detrimental to the Hop-In’s value and stance in the marketplace. There will be an obvious amount of revenue that could have been generated and result in an unwanted loss of business for the...

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