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Initial Public Offering Case Study


Introduction

Initial Public Offering (IPO) is one of the key ways through which companies raise capital to realize growth and development (Bragg, 2009). Companies normally raise capital by selling their equities to the public for the first time.

The result of such an initial selling of the company’s equity emanates in terms of increased capital and shareholders. Apple Inc. is an example of the corporations that went public to raise capital for their expansions and to be publicly traded.

Apple Inc. Background

Apple Inc. together with its subsidiaries produces a range of computerized products including personal computers, media devices, mobile communications as well as portable digital music players. In 2007, Apple Inc. became a publicly listed company with its stocks traded and quoted on NASDAQ, where it is well-known with the symbol AAPL (Apple Inc., 2010).

Over the last five years, AAPL share prices have tremendously increased and are currently among the highly priced stocks in NASDAQ. The number of Apple Inc. equity holders has grown over the last four years of operation.

AAPL returns on investments have grown from $1.5 million to over $600million dollars in the fiscal 2010. This was accompanied by an increase in the total global market share and constant growths in sales and revenue.

By 2010, Apple Inc. net revenue was over $14 million which translated into $15.41 earnings per share, the highest earning within the security markets (Apple Inc., 2010). AAPL total shareholders’ equity grew to above $47 million with market capitalization of over $590 billion.

Apple Inc. is a unique company in the technology industry because of the way it utilizes its technological capabilities to drive its growth and development (Apple Inc., 2010).

Despite the competition in the technology industry, Apple is amongst the companies that have applied their innovative potential to remain top in the competitive edge. AAPL profits and sales volume have soured above its competitors because of its incessant introduction of new products to the market. Products like iPod, iPod and iTunes have facilitated Apple’s market share growth, resulting into revenue growth.

Apple Inc. generated more capital in its IPO than any other company, after Ford-motor’s IPO in 1956. Apple IPO immediately created more millionaires than any firm in history and this was approximated to be around 300 (Apple Inc., 2010). During the launch of its Initial Public Offering of stock to the public investors, venture capitalist cashed out money yielding billions on their long-term capital gains.

Going public immediately changed the corporation’s management as Apple had to deal with increased number of shareholders and the requisite procedures that must be complied with. Though Apple raised the needed capital, IPO exposed the company into rigorous compliant measures and competitions (Padberg, 2007).

For Apple to remain in the securities market, the company must comply with the SEC and accounting standards regulations which are very expensive.

Even though IPO is one of the best ways to raise capital, it is a risky venture for a company to undertake (Beinecke 2002). Normally, the process requires well experienced underwriters who are able to correctly predict when to offer securities and the decisive prices.

The procedure is usually a long process and may take several months before the actual date reached (Beinecke, 2002). Furthermore, it is often difficult to predict the behavior of stock on the initial trading day even in the future. The reason is that there is petite historical financial data that can be used to analyze the company.

Conclusion

Since Apple Inc. became public, it has remained a successful company. As indicated, Apple Inc. generated huge capital through its IPO as was predicted and the number of equity holders also increased.

The capital generated has led to the growth and development of Apple since it allowed the company to invest heavily on research and development. The securities market analysis indicates that Apple has a growth potential in the prospective years.

References

Apple Inc. (2010). Apple inc. 2010 annual report. Web.

Beinecke, C. K. (2002). How to prepare an initial public offering. New York, NY: Practicing Law Institute.

Bragg, S. M. (2009). Running a public company: From IPO to SEC Reporting. Hoboken, NJ: John Wiley & Sons.

Padberg, H. (2007). Initial public offering (IPO) and theories of underpricing. Munich, Germany: GRIN Verlag.

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IvyPanda. (2019, December 19). Initial Public Offering. Retrieved from https://ivypanda.com/essays/initial-public-offering/

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"Initial Public Offering." IvyPanda, 19 Dec. 2019, ivypanda.com/essays/initial-public-offering/.

1. IvyPanda. "Initial Public Offering." December 19, 2019. https://ivypanda.com/essays/initial-public-offering/.


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IvyPanda. "Initial Public Offering." December 19, 2019. https://ivypanda.com/essays/initial-public-offering/.

References

IvyPanda. 2019. "Initial Public Offering." December 19, 2019. https://ivypanda.com/essays/initial-public-offering/.

References

IvyPanda. (2019) 'Initial Public Offering'. 19 December.

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