CREATING ONE’S OWN CURRENCY is the motivation for every company to go public. In order to fund internal and external growth, to diversify the future sources of finance and to strengthen the financial structure of the company, that ideology is most essential. When a company is listed on the stock exchange, it results in tradability and liquidity, allowing the previous shareholders to exit, realizing the gain on the capital. It also adds a value for the company which will be useful for the future success plans. On the strategic level the IPO will enable the company to cleanse its strategies and make the focus clearer in its activities. It also increases the visibility of the company and its credibility too. This ultimately makes a difference from the competitors. However, an IPO changes the way a company operates. Corporate governance has to be refitted, support functions must be professionalized and financial announcements must be made crystal clear. Only when these information are withheld, a negative result will be derived on the share price, which will be greater when the news leaks out in the market.
Sandy Campart is a lecturer and researcher. He is a member of the Centre of Research for Economics and Management (CREM), part of the French National Centre for Scientific Research (CNRS). M. Campart is director of IUP Banque Finance Assurance de Caen – a finance school in Normandy – and author of “If we dared to invest in the stock market”. The ideas of implementing IPOs and the benefits are discussed by him in this article.
In the year of 2019, the new emerging companies saw a rise in the share price by almost 13 per cent on an average especially the IT and Software companies have performed their best with an average of 40 per cent rise. The stock market performances of SmileDirect (dental aligners), Peloton (exercise bikes and fitness) and even Uber proved to have increased number of investors for their exaggerated levels of profitability. But Uber’s price has been disappointing lately, after the latest presentations were below the expected rates of the investors. The second Quarter of the year brought a turnover of more than 5 per cent lower than what was expected. The Profit was 53 per cent greater than expected, Uber’s CEO, Dara Khosrowski, told his emplyoees that the teams were too large to be compatible with the pace of growth needed.
WeWork is the most noticeable example of the current inability to differentiate between a unicorn and a chimera. Investors have to learn on how to fight those attractive equity fairy stories and envision beyond the ground-breaking nature and rapid growth of a concept. Cash flow, debt level and governance remain key policymaking factors. In the WeWork brochure, the word “technology” seems to repeat itself for more than 120 times. This method of repetition is being used to propose that old-style assessment models should not apply to this business. WeWork is more of a assets developer with an advanced business model than it is a technology company.