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Essay / Research Paper Abstract
This 3-page paper offers the differences between traditional IPOs and online auction IPOs. The paper discusses Google's and Morningstar's IPOs as examples. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTiposecli.rtf
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Unformatted sample text from the term paper:
shares for purchase on the market. Aside from the resources needed to put the IPO together (and to get it underwritten), there
are other decisions that need to be made. IN this paper, well try to answer if Second Life should use a traditional IPO or an online auction.
Before answering this, it would be helpful to delineate the differences between the two. With a traditional IPO, a company hires an investment bank to
underwrite the company (Essortment, 2008). The bank researches the companys likely market value, which leads to the decision of how many shares to offer and at what price (Essortment, 2008).
With this information in hand, the bank and company take it on the road to potential large investors (such as institutions or wealthy individuals) (Essortment, 2008). Once the stocks are
in the hands of the investors, they can trade them on the first open trading day (Essortment, 2008). Stocked issued in traditional IPOs, particularly to investors, trade significantly higher than
the initial price when trading begins, meaning the profits go to a small group of investors (Essortment, 2008). The benefit in
having a traditional IPO is that it tends to receive more publicity than its auction-based counterpart, and when it comes to IPOs, publicity helps (Essortment, 2008). This is especially the
case if the price increases appreciably after day one of trading (Essortment, 2008). Investment return is also higher (Essortment, 2008). The downside is, of course, the cost. There are costs
to the banker and costs to the road show. Furthermore, with the opening day of trading, the profits will go to investors rather than the company (Essortment, 2008).
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