10 reasons for holding an IPO
On May 21, many media outlets published rumors that Yandex and Mail.ru would be listed on the stock exchange in 2008. There are also persistent rumors that in the near future, noticeable ($ billion +) IPOs of Kaspersky Lab, ABBYY, Parallels (former SWsoft) and one of the IBS subsidiaries are expected overseas. You look, and there will ripen and younger companies - Ozone, Headhunter, Mamba and, perhaps, one of the companies that you create, will also hold an IPO. In short, I believe that interest in an IPO will only grow. Therefore, I wrote for myself 10 classic reasons why a Russian IT company could hold an IPO. Perhaps these thoughts will also be useful to you - so I decided to put them on display and criticize a respected public.
1. Getting the company cash. This happens if the company issues additional shares. The money goes to the development of new projects, as well as the purchase of companies. Partly for this reason, conducted an IPO "RBC". The money received, including a business news channel “RBC-TV”, was built.
2. Creating your own currency for future acquisitions. If the company's shares are traded on the stock exchange, then, as a rule, at any moment it is easy to evaluate their equivalent in our usual rubles. As a result, the public company gets into the hands of another tool that facilitates the purchase of other companies. The seller quite often receives visual confirmation that being a part of a public company, he is rated higher than an independent company. This reason is typical for IT integrators, since the margin in the integrator business is relatively small, and any economies of scale synergistically increase the company's value (2 + 2 = 5). The situation may be reversed when two departments within one company cost less than separately existing companies (2 + 2 = 3). In this case, it makes sense to do the so-called spinout (“spinout”, which, again, was clearly demonstrated by RBC, leading it to the IPO Armada.
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3. Liquidity for investors. Investors who have invested in the development of a private company have limited opportunities to exit such an investment while the company remains private. As a rule, these are sales to other investors (“secondary” - “secondary repurchase”), and, rarely, to the founders or managers of a company (“founders or management buyout” - “repurchase by managers”). However, when the company goes public, and investors are able to relatively easily exchange their shares for ordinary money, although this process is a bit more complicated than visiting a currency exchange stall. If there are substantial profits accumulated within the company, this is the most likely main reason for the IPO, conducted in 2005 by the IBS Group, and for the possibly future IPO of Yandex.
4. Liquidity for employees. Some advanced managers and developers today prefer to receive part of their remuneration in the form of stocks or various derivatives of stocks. As a rule, such managers are paid below market wages, but they believe in the ultimate success of their company, which, in turn, is ready to entrust, at least to some of its employees, the right to own oneself. As a rule, managers receive a package of options on the so-called “vesting schedule” - a schedule for the transfer of a predetermined number of shares into the hands of a manager. Typically, the schedule distributes the issuance of a package for 4 years in a linear manner so that the manager has the opportunity to leave the company before the end of the deadline and still receive a portion of the total remuneration; as a rule, the schedule is subject to a restriction called “cliff” - work at least a year before the opportunity will receive the first quarter of the entire package.
5. Liquidity for the founders of the company. IPO is the culmination of the company's founders. After many sleepless nights, months of uncertainty and many years of tremendous work, this is an opportunity to receive real money in exchange for the idea that was once thought up and its realization. This reason lies behind all IPOs.
6. Improving the company's position in relation to end users. The opportunities of colossal marketing are often overlooked even by the companies themselves, although as a result mass Internet services benefit most of all, despite the fact that communication with the press in the period preceding the IPO is strictly limited to the exchange. The reverse side of this restriction is a massive free marketing campaign, part of which we observed last week in the form of articles about the upcoming billions of Yandex and Mail.ru. Name at least one opportunity to get the opportunity to be mentioned in the press thousands of times without any effort. Nothing comes to mind except a grand scandal or a natural disaster. It seems that Mail.ru understands these opportunities IMHO better than others and will use them if rumors about its upcoming IPO come true.
7. Improving the company's position in relation to customers, lenders and partners. Having become a public company, it is very easy for a company to refer to financial reports that are available on the exchange to receive all sorts of concessions in relations with contractors. The image of the company, improved by the press in the pre-IPO process, attracts more customers and, as a rule, facilitates negotiations.
8. Improving the company's position in relation to competitors. The overall effect of the IPO improves the company's position in relation to its competitors. Examples are numerous. For example, the status of a public company makes it easier to find and attract employees to work, as many prefer to work in a company whose name is known. The perception that it is relatively easy for a public company to raise additional funds on market terms gives undoubted market advantages in comparison with its competitors.
9. Increasing the value of the company. As a rule, but not always, a public company has a higher value than a similar private company. The reasons are the higher liquidity of its shares and higher standards of information disclosure by a public company. Occasionally in developed markets it is more profitable to restructure a mature company in private greenhouse conditions, away from the quarterly pressure of analysts and traders. Another reason is the receipt of long-term contracts from the state, the fulfillment of which requires increased secrecy and is incompatible with the standards of information disclosure of a public company. In this case, the company is withdrawn from the stock exchange back into private hands (“going private”). Hopefully, it will be many years before this step can be relevant for Russian companies.
10. Access to public markets in the future. If a company once entered the stock exchange, it is much easier for it to continue to turn to public markets to finance new projects, large-scale purchases or restructuring of debt obligations. In other words, access to the stock exchange significantly adds degrees of freedom for the company when making strategic decisions.
I would like to note that as a result of new IPOs of Russian companies, interest in all Russian IT companies from investors will only grow. For example, on May 21, on the day of the announcement of rumors about Yandex and Mail.ru, the shares of Rambler on the London Stock Exchange grew by 12%, and the shares of RBC on the Moscow Interbank Currency Exchange - by 4.4%, which can be seen on the chart (after login) .
If something is unclear - write. I will try to clarify.
1. Getting the company cash. This happens if the company issues additional shares. The money goes to the development of new projects, as well as the purchase of companies. Partly for this reason, conducted an IPO "RBC". The money received, including a business news channel “RBC-TV”, was built.
2. Creating your own currency for future acquisitions. If the company's shares are traded on the stock exchange, then, as a rule, at any moment it is easy to evaluate their equivalent in our usual rubles. As a result, the public company gets into the hands of another tool that facilitates the purchase of other companies. The seller quite often receives visual confirmation that being a part of a public company, he is rated higher than an independent company. This reason is typical for IT integrators, since the margin in the integrator business is relatively small, and any economies of scale synergistically increase the company's value (2 + 2 = 5). The situation may be reversed when two departments within one company cost less than separately existing companies (2 + 2 = 3). In this case, it makes sense to do the so-called spinout (“spinout”, which, again, was clearly demonstrated by RBC, leading it to the IPO Armada.
')
3. Liquidity for investors. Investors who have invested in the development of a private company have limited opportunities to exit such an investment while the company remains private. As a rule, these are sales to other investors (“secondary” - “secondary repurchase”), and, rarely, to the founders or managers of a company (“founders or management buyout” - “repurchase by managers”). However, when the company goes public, and investors are able to relatively easily exchange their shares for ordinary money, although this process is a bit more complicated than visiting a currency exchange stall. If there are substantial profits accumulated within the company, this is the most likely main reason for the IPO, conducted in 2005 by the IBS Group, and for the possibly future IPO of Yandex.
4. Liquidity for employees. Some advanced managers and developers today prefer to receive part of their remuneration in the form of stocks or various derivatives of stocks. As a rule, such managers are paid below market wages, but they believe in the ultimate success of their company, which, in turn, is ready to entrust, at least to some of its employees, the right to own oneself. As a rule, managers receive a package of options on the so-called “vesting schedule” - a schedule for the transfer of a predetermined number of shares into the hands of a manager. Typically, the schedule distributes the issuance of a package for 4 years in a linear manner so that the manager has the opportunity to leave the company before the end of the deadline and still receive a portion of the total remuneration; as a rule, the schedule is subject to a restriction called “cliff” - work at least a year before the opportunity will receive the first quarter of the entire package.
5. Liquidity for the founders of the company. IPO is the culmination of the company's founders. After many sleepless nights, months of uncertainty and many years of tremendous work, this is an opportunity to receive real money in exchange for the idea that was once thought up and its realization. This reason lies behind all IPOs.
6. Improving the company's position in relation to end users. The opportunities of colossal marketing are often overlooked even by the companies themselves, although as a result mass Internet services benefit most of all, despite the fact that communication with the press in the period preceding the IPO is strictly limited to the exchange. The reverse side of this restriction is a massive free marketing campaign, part of which we observed last week in the form of articles about the upcoming billions of Yandex and Mail.ru. Name at least one opportunity to get the opportunity to be mentioned in the press thousands of times without any effort. Nothing comes to mind except a grand scandal or a natural disaster. It seems that Mail.ru understands these opportunities IMHO better than others and will use them if rumors about its upcoming IPO come true.
7. Improving the company's position in relation to customers, lenders and partners. Having become a public company, it is very easy for a company to refer to financial reports that are available on the exchange to receive all sorts of concessions in relations with contractors. The image of the company, improved by the press in the pre-IPO process, attracts more customers and, as a rule, facilitates negotiations.
8. Improving the company's position in relation to competitors. The overall effect of the IPO improves the company's position in relation to its competitors. Examples are numerous. For example, the status of a public company makes it easier to find and attract employees to work, as many prefer to work in a company whose name is known. The perception that it is relatively easy for a public company to raise additional funds on market terms gives undoubted market advantages in comparison with its competitors.
9. Increasing the value of the company. As a rule, but not always, a public company has a higher value than a similar private company. The reasons are the higher liquidity of its shares and higher standards of information disclosure by a public company. Occasionally in developed markets it is more profitable to restructure a mature company in private greenhouse conditions, away from the quarterly pressure of analysts and traders. Another reason is the receipt of long-term contracts from the state, the fulfillment of which requires increased secrecy and is incompatible with the standards of information disclosure of a public company. In this case, the company is withdrawn from the stock exchange back into private hands (“going private”). Hopefully, it will be many years before this step can be relevant for Russian companies.
10. Access to public markets in the future. If a company once entered the stock exchange, it is much easier for it to continue to turn to public markets to finance new projects, large-scale purchases or restructuring of debt obligations. In other words, access to the stock exchange significantly adds degrees of freedom for the company when making strategic decisions.
I would like to note that as a result of new IPOs of Russian companies, interest in all Russian IT companies from investors will only grow. For example, on May 21, on the day of the announcement of rumors about Yandex and Mail.ru, the shares of Rambler on the London Stock Exchange grew by 12%, and the shares of RBC on the Moscow Interbank Currency Exchange - by 4.4%, which can be seen on the chart (after login) .
If something is unclear - write. I will try to clarify.
Source: https://habr.com/ru/post/26157/
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