The document discusses internal public offerings (IPOs), including: - A brief history of early public companies and the first modern IPO by the Dutch East India Company in 1602. - An overview of the advantages and disadvantages of going public for a private company. - An outline of the typical IPO process including selecting an underwriter, filing registration statements, pricing shares, and distributing funds. - Descriptions of some notable biggest IPO fails and successes in history by companies like Facebook, Pets.com, and General Motors. - A calendar of anticipated IPOs in 2013 for companies like Square, Tableau Software, and Twitter.

1. Internal Public
Offering
International Black Sea University
Business Management Faculty,
Finance major
Financial Markets & Institutions
By:
Nino Bazhunaishvili
24/09/13

2. Contents
 History
 Reasons for Listing
1.
2.
Advantages
Disadvantages
1.
2.
3.
4.
Advance Planning
Pricing of IPO
Quiet period
Delivery of shares
 Procedure
 5 Biggest IPO Fails in History
 Largest IPOs in History
 2013 IPO Calendar

4. IPO
 An initial public offering (IPO) is the process through
which a privately held company issues shares of stock to
the public for the first time. Also known as "going public,"
an IPO transforms a small business from a privately owned
and operated entity into one that is owned by public
stockholders.
In an IPO, the issuer obtains the assistance of an
underwriting firm, which helps it determine what type
of security to issue (common or preferred), the best
offering price and the time to bring it to market.

5. HISTORY
The earliest form of a company which issued public
shares was the publicani during the Roman Republic
There is evidence that these shares were sold to public
investors and traded in a type of over-the-counter market
in the Forum, near the Temple of Castor and Pollux . The
shares fluctuated in value, encouraging the activity of
speculators, or quaestors.

6. HISTORY(CONT)
In March 1602 the “Vereenigde Oost-Indische Compagnie
(VOC), or Dutch east Indian company was formed.
• The VOC was the first modern company to issue public
shares, and it is this issuance, at the beginning of the 17th
century, that is considered the first modern IPO.
• The company had an original paid-up share capital of
6,424,588 guilders.
• Each share was worth 3000 guilders (roughly equivalent
to US 1500$).
 In the United States, the first IPO was the public offering
of Bank of north America around 1783

7. ADVANTAGES
When a company lists its securities on a public exchange, the
money paid by the investing public for the newly issued shares
goes directly to the company (primary offering) as well as to any
early private investors who opt to sell all or a portion of their
holdings (secondary offering) as part of the larger IPO.
An IPO accords several benefits to the previously private
company:
Enlarging and diversifying equity base
Enabling cheaper access to capital
Increasing exposure, prestige, and public image
Attracting and retaining better management and employees
through liquid equity participation
Facilitating acquisitions (potentially in return for shares of stock)
Creating multiple financing opportunities: equity, convertible
debt, cheaper bank loans, etc.

8. DISADVANTAGES
There are several disadvantages to completing an
initial public offering:
Significant legal, accounting and marketing costs, many of
which are ongoing
Requirement to disclose financial and business information
Meaningful time, effort and attention required of senior
management
Risk that required funding will not be raised
Public dissemination of information which may be useful to
competitors, suppliers and customers.
Loss of control and stronger agency problems due to new
shareholders

9. Procedure
4. Throughout the
3.
2. To assemble
an underwriting
team
1. To select the
underwriter
•Consisting of attorneys
•Independent of
•Best Effort
•Financial printer
•Firm commitment
•All or non
•Bought deal
accountants
prepare an initial
registration
statement
according to SEC
regulations
SEC review
company also
begins making
controlled efforts to
market the
offering.
After a successful offering, the
underwriter meets with all parties to
distribute the funds and settle all
expenses. At that time the transfer
agent is given authorization to forward
the securities to the new owners.

10. PRICING IPO
A company planning an IPO typically appoints a lead manager,
known as a bookrunner, to help it arrive at an appropriate price
at which the shares should be issued. There are two primary
ways in which the price of an IPO can be determined. Either the
company, with the help of its lead managers, fixes a price
("fixed price method"), or the price can be determined through
analysis of confidential investor demand data compiled by the
bookrunner.
The effect of "initial underpricing" an IPO is to generate
additional interest in the stock when it first becomes publicly
traded.
The danger of overpricing is also an important consideration. If
a stock is offered to the public at a higher price than the market
will pay, the underwriters may have trouble meeting their
commitments to sell shares.

11. QUIET PERIOD
• Under American securities law, there are two time
windows commonly referred to as "quiet periods" during
an IPO's history. The first and the one linked above is the
period of time following the filing of the company's S-1 but
before SEC staff declare the registration statement
effective.
• In terms of an IPO, the period where an issuer is subject
to a SEC ban on promotional publicity. The quiet period
usually lasts either 40 or 90 days from the IPO.

12. DELIVERY OF SHARES
For most small businesses, the decision to go public is
made gradually over time as changes in the company's
performance and capital needs make an IPO seem more
desirable and necessary. But many companies still fail to
bring their plans to sell stock to completion due to a lack of
planning.

13. 5 Biggest IPO Fails in History
1.
In 2012, Mark Zuckerberg launched Facebook in a $16 billion
IPO. Initially the company had filed for a $5 billion IPO and the
company had been valued at $104 billion
Each share was worth $38
Shares struggled to keep their head above water on the
opening of trading on May 18th, but surprisingly there were 460
million shares changing hands and that was the largest ever
trading volume for an IPO.
Today Facebook has a stock value
of $24.33.

14. 5 Biggest IPO Fails in History
2.
eToys wasn’t always a dismal failure. It was
once at the top of the toy market, competing with
Toys ‘R’ us and the others and giving as good as
they could get.
The prices of a share should have been
somewhere around the $10-$12-mark on opening
in 1999. But, the final offering ended up at $20.
The IPO OF eToys, at the time, was the fifthbiggest debut in history, giving a start-up with
just $35 million in revenue a bigger market
capitalization than Toys 'R' Us, which at the time
had $11 billion in sales.

15. 5 Biggest IPO Fails in History
3.
Pets.com is another one that rolled over
and died with its legs in the air. It opened
shop in 1998 and lasted just over two
years.
It raised $82 million for its IPO and
shares were at $14.

16. 5 Biggest IPO Fails in History
4.
Vonage is a voice-over IP network. It still exists
and is one of the few that managed to scrape
through even though it hit rock bottom. It went
public in 2006 at a share price of $17. It dropped by
over $23% in just that first day and ended up at $13.
The IPO raised $531 million for the company

17. 5 Biggest IPO Fails in History
5.
LastMinute.com is still around too, but only by being
bought up itself at the last minute by Travelcity in 2005.
LastMinute.com is specialized in anything that you can buy
at the last minute from cheap airline tickets to the theatre
tickets for the show you always wanted to see. At its peak it
had 500, 000 visitors per day.
share price of 380p on the London Stock Exchange valued
the company at £571 million. Shares rose by 28% on that
first day to 511p.

18. Largest IPOs
#10: Bank of China (PINK:BACHY) isn’t even
listed on a major U.S. exchange, but its 2006 IPO
topped $11.2 billion. As the name implies, it’s a
massive China financial operation
#9: Deutsche Telekom (PINK:DTEGY) is
another pink sheet powerhouse that offered stock
elsewhere and not on major U.S. exchanges.
Proceeds from the 1996 IPO topped $12.5 billion
at the time. If adjusted for inflation, this IPO
would be even higher up the list, too.

19. Largest IPOs
#8: Nippon Telegraph and Telephone (NYSE:NTT) is now
offered as an ADR, or American Depositary Receipt, for
domestic investors. But at the time of its 1987 IPO, the company
wasn’t available on the NYSE. Nippon raised $13.7 billion (not
adjusting for inflation)
#7: Enel (PINK:ENLAY) is a former nationalized energy
company in Italy, which has never been listed on U.S.
exchanges. Proceeds from the 1999 IPO total $16.6 billion.
#6: NTT DoCoMo (NYSE:DCM) is one of Japan’s leading
providers of mobile and data services. Shares went public in
Tokyo back in 1998, raising $18.1 billion (not adjusted for
inflation). Shares weren’t available as ADRs until years later

20. Largest IPOs
#5: Visa (NYSE:V) finally places an American IPO on the list.
The payment processor was the last big IPO before the market
for public offerings went into hibernation due to the financial
crisis. In 2008, Visa raised $19.7 billion with its IPO.
#4: American International Assurance, or AIA, is a major
insurance company based in Hong Kong. It once was a division
of bailout target American International Group (NYSE:AIG)
but was spun off in part to satisfy debts. The proceeds of the
AIA IPO were $20.5 billion in 2010.

21. Largest IPOs
#3: Industrial and Commercial Bank of
China (PINK:IDCBY) is another big Chinese financial outfit
that doesn’t trade on major domestic exchanges. The 2006
IPO of this bank raised $21 billion through simultaneous
listings on both the Hong Kong Stock Exchange and Shanghai
Stock Exchange to tally the largest IPO in history at the time.
#2: Agricultural Bank of China topped this previous IPO,
however, in 2010 with the largest IPO in history … again, at
the time anyway. The tally was a total $22.1 billion in
proceeds.

22. Largest IPOs
#1: General Motors (NYSE:GM) might surprise you as the
top IPO in history. The $23.1 billion public offering of GM
stock back in 2010 was performed, in part, to pay back the
government. At the time, Uncle Sam owned a 61% stake in
the automaker. Unfortunately, the feds didn’t recoup as
much cash as they had hoped. Ultimately, taxpayers lost
money on the automaker bailouts despite GM’s recordbreaking IPO.

23. 2013 IPO Calendar
Square - Starbucks in August partnered with Square in a
$25 million deal that lets the mobile payments company
process all of the coffee giant’s debit and credit transactions.
Square should continue gaining popularity as the “” industry
takes off. Besides being a major player in this up and coming
industry, Square is often thought of as a takeover target.
Tableau Software – This Seattle, WA-based company
could be the next big cloud IPO. Tableau is a datavisualization company which devises programs that turn
complex databases into graphics and maps. Over 10,000
companies including Apple Inc. (Nasdaq: AAPL) and CocaCola Co. (NYSE: KO) use Tableau products, and after the
success Workday and Splunk had many are expecting
Tableau to have similar results.

24. 2013 IPO Calendar
Silver Spring Networks- Located in Silicon Valley,
Silver Spring Networks sells cloud-based, power grid
management hardware and software to utility companies.
In 2011 its revenue grew 238% and it almost went public
branded as a green energy company, but put the deal on
the shelf after the Solyndra scandal and has since
repositioned itself as a cloud company involved in
“cleantech.” But, with the success SolarCity Corp
(Nasdaq: SCTY) had in its 2012 IPO, things are looking up
for green energy. Add that to the success enterprise
software, or cloud companies have had, and Silver Spring’s
IPO looks very promising.

25. 2013 IPO Calendar
Glam Media- Glam Media is a vertical-media company
with entertainment and lifestyle Websites and blogs
mostly geared toward a female demographic. The company
generates revenue through ads and has been profitable
since 2010. Glam continues to grow through acquisitions
and currently has 356 million unique visitors per month to
its site. In June of 2012 Glam was rated the #1 digital
lifestyle Website in the world by comScore.

26. 2013 IPO Calendar
Rapid7 & WhiteHat Security- One or both of these
companies could be the next huge cyber security play, as
both are thought to go public in 2013. Rapid 7 saw its
revenue grow by 75% in the third quarter of 2012 and
continues to expand its product portfolio. WhiteHat was
founded by a former Yahoo! Inc. (Nasdaq: YHOO)
information security chief, and dozens of Fortune 500
companies rely on WhiteHat for protection. As the world
becomes more complex, uncertain, and digital, expect
cyber security companies to grow in importance and value.
Plus, both of these are prime takeover targets by larger
security and defense firms

27. 2013 IPO Calendar
Dave & Buster’s- In October it pulled its IPO off the shelf, but
keep an eye out for an offering some time in 2013. The company
provides the best arcade and gaming experience for adults and
was hoping to join other restaurant companies such as Bloomin’
Brands Inc. (Nasdaq: BLMN) and Chuy’s Holdings Inc.
(Nasdaq: CHUY) that have had successful IPOs this past year.
Twitter- This would be 2013′s biggest tech IPO, and after
Facebook’s debacle, Twitter’s IPO may really define social media
investments. Recent announcements though indicate a Twitter
IPO may have to wait until 2014. The company recently said it
expects to generate up to $1 billion in revenue by 2014, and
there’s always speculation that it could be acquired by Google
(Nasdaq: GOOG) or another company. Its revenue model is still a
little shaky but Twitter has proven to be able to monetize mobile
users much quicker and effectively than Facebook.

28. Upcoming IPOs to Avoid
Pinterest & Tumblr- Both of these companies face issues
similar to Facebook’s in terms of generating profits and
revenue from their user base, as well as monetizing mobile
users. Pinterest has not proven its business strategy is
legitimate and has even admitted it does not know how to
turn its user base into profits. While just as popular as
Pinterest and Facebook, Tumblr is an even riskier IPO to
consider, and generates minimal revenue. Even though both
sites are incredibly popular, their fate as public companies
could easily follow Facebook’s path.
LivingSocial- The vouchers Website might go public in 2013,
but its business structure is too similar to Groupon Inc.’s
(Nasdaq: GRPN), which has done awful since its IPO. After
touching $30 on its IPO day, GRPN immediately began to sell
off and currently trades around $5. If LivingSocial has an IPO
make sure to avoid it.

29. Bibliography
http://www.investopedia.com/terms/i/ipo.asp
http://en.wikipedia.org/wiki/Initial_public_offering
http://www.nasdaq.com/markets/ipos/
http://www.hoovers.com/ipo-central/100004160-1.html
http://economictimes.indiatimes.com/ipo

30. Any Question ?
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