NewsWire--MAY 14, 1996
TOPIC: Raising Capital,
Initial Public Offers
SOURCE: "America's
Amazing IPO Bonanza," Fortune, May 27, 1996, 76-80;
"How to Make $400,000,000 in Just One Minute," Fortune,
May 27, 1996, 84-92.
SYNOPSIS: There is strong
demand for stocks in general and for IPOs in particular. Investors
are clearly eager to bid for an equity stake in small startups
that typically have modest revenues, no profits, and very high
risk. The first article discusses the reasons for the massive
increase in IPO activity in 1996. It includes tables that summarize
recent initial public offerings and those that are scheduled for
the near future. The second article discusses the role of the
venture capitalist in the financing process. Several deals generating
wealth of over $100 million dollars for these investors and the
founders of the firms they financed are detailed.
DISCUSSION QUESTIONS:
1. What is an initial public offer, or IPO? Why
have so many firms gone public or made plans to do so recently?
What industries dominate the current IPO market
2. Successful IPOs, such as Netscape or Xylan,
often involve companies with very modest revenues, little or no
profit, and no real likelihood of a dividend for may years to
come. Why are investors willing to bid significant prices for
these shares? How can you value such firms?
3. Explain the role of the venture capitalist
in the process of going public.
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