Let us break this down 

1. An Idea is born

2. Company starts in a garage

3. Becomes a bigger company

4. Files proper documents with a bank and SEC

5. Raises money

6. Chooses a date

7. Rings the bell

8. All equals an IPO

Now, let us piece this together, you think of an idea one day and run with it, now you start this company in your garage and slowly it grows, from you and a couple buddies to actual employee’s and you move into a real office! You decide that you are big enough and file proper documents with a bank and the SEC, now you go through a round of raising money with investors. Finally, you choose a date and put on your best suit, the day to ring the bell on the New York Stock Exchange has finally come. You ring the bell and your company is now public. This all equals IPO #MamaIMadeIt 

IPO: IPO stands for Initial Public Offering, and is the coveted prize for most private companies, they work their whole lives to either get bought out or file for IPO by themselves.  There are a few strategic reasons why a company goes public and why it matters to us.

Why Go Public

• Better rates when they issue debt

• Easier to raise capital, as they raise money through issuing shares and investors (us) buying them

• Liquidity. Often executives can cash out huge lump sums of money as well as companies can offer more lucrative incentives to their employees

• Prestigious and it gives your company recognition

Why We Care

• Finally invest in companies we care about (when you buy a share of Facebook, you actually own a percentage of Facebook)

• Profit from the early times of a company, Google debuted at $100 a share on its IPO day, early investors gained over 500% in a few years on the stock

One small detail, unless you are an institutional investor or on the “inside” then it is very hard to get the initial pricing of the company, as that “raising money” phase before ringing the bell is often the initial price before it hits the demand of the secondary markets, where most normal investors can get their hands on the stock. Regardless IPO’s are often an exciting time for a company and for an investor. 

2017 has already been a crazy year for IPO’s from Snap to MuleSoft there are tons of tech companies filing for IPO, we are looking forward to seeing other unicorn companies like Uber, Lyft and Spotify make the plunge in the next year or so. Who do you think is next?