Why Companies Go Public?

Discussion in 'Trading' started by stocktrader3429, Jul 30, 2007.

  1. I just need a little bit of clarification. Once the company goes public and raises X amount of money, I'm assuming the day-to-day prices doesn't matter one bit to it. Correct?

    On the other hand, I can see why they would want their prices to go higher. Many employees (esp. management) gets paid in stock options, so if the performance of the company is good, they will end up making money. Otherwise, they will lose it.

    But is the rising stock price a good thing for the company overall, since it has already raised whatever amount it needed during IPO or does it get benefit from a rising stock price other than salaries?
  2. 2006


    Hmmmmmm maybe it has something to do with the founders/managemen getting filthy rich.
  3. gnome


    Companies often want/need to raise more capital later. They do that by releasing shares they have authorized and holding in their treasury, but unissued. A higher stock price would mean more money on later stock offerings. I believe such an issuance would be a type of IPO... a Secondary Offering..??
  4. so other than salaries and future shares that companies have under treasury, there's no "real" monetary reason for the company itself to keep pushing the stock price up, right?
  5. They can also get loans from IBanks that they pay back using stock as currency.
  6. That is correct. It would be a secondary offering. Also, if the stock is trading at a premium it gives them the ability to acquire competitors and enter new markets through acquisition.

    The possibilities are endless!

  7. ryank


    They don't always sell 100% of the company in the IPO, they keep some stock in the company to use later.
  8. so while it doesn't impact the company directly on overall price fluctuations (i.e., they don't get a lump sum check of $100MM every month, for instance), they can obviously use those shares to secure debt, acquire companies etc.

    And I'm thinking when they acquire companies or secure debt, they issue new shares from their treasury?
  9. ryank


    I believe that is how it typically works.
  10. They want to catch up with Bill Gates.
    #10     Jul 31, 2007