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What is an IPO?

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As the saying goes, ideas are a dime a dozen. Acting on an idea though can make all the difference. Say you turn your vision into a start-up. It starts small. Then it gets even bigger. Then it gets even bigger. Until one day, you may get to decide it’s time for your company to go public. So What do IPO concerns in Business Sector? And What is IPO?

IPO

IPO stands for an initial public offering. It’s the very first sale of a stock issued by a company on the public market, which essentially means you’re turning your private company into a public one. So, when it’s private, a company is normally owned by a small number of investors. That usually consists of people like you, your friends or parents, plus professional investors like a venture capital firm.

Once the company goes public, you’re opening up that business to be owned by a large number of people. In effect, the firm goes from being owned by just a few people, to potentially tens of thousands of shareholders. To commemorate the event, most stock exchanges hold a ceremony of sorts.

At the New York and London stock exchanges, you’ll ring the bell. At the Stock Exchange of Hong Kong, you’ll strike the gong. So why go public?

New York Stock Exchange

 


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Well, going public raises a lot of cash for a company. With that money, it becomes easier to scale and grow, invest in infrastructure and attract top candidates. Plus, there are the bragging rights you get from being listed on a stock exchange.

It’s important to note that large companies can also stay private too. IKEA, Mars, Aldi, and State Farm are just some examples of massive companies, that are private. After all, going public isn’t a simple process, normally taking about four months to complete.

The company will start with finding what’s known as an underwriting firm, typically an investment bank or several. If and when the firm takes on the job, they put up the money to fund the IPO, essentially ‘buying’ the shares before they’re actually listed anywhere. The firm works with the company to determine what type of security to issue, an offering price, the number of shares and the optimum time to bring a company to the public market.

What is IPO share Holders

In the U.S., they also handle registering with the U.S. Securities and Exchange Commission, which makes sure all of the financial information has been disclosed and is accurate. Then you’re finally good to go.

The underwriter’s goal is to sell shares to the public for more than it paid the company. After all, that’s how they make their money. But going public can also mean a nice payday for the business’ founders and early investors.


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You often hear about people becoming millionaires or even billionaires after their company goes public. Here’s why. If you’ve worked at a private company that’s intending to go public one day, sometimes part of your compensation is given through equity, part-ownership of the firm. It’s a way to hire talented people without a lot of cash upfront. And if the company does go public, you get a piece of it at its new valuation. Here’s an example.

When Snapchat went public in 2017, its founder Evan Speigel scored big. Speigel got a stock grant of $636 million when the company went public. The following year, he sold more than 2.6 million shares. The sale of his stock was equivalent to $50 million.

Snapchat goes Public

The number of companies going public is constantly fluctuating. Globally, 1,764 companies floated in 2017,  a nearly 50% increase since 2016 and the most IPOs since 2007. 189 of 2017’s IPOs were in the U.S., a 70% increase from the year before.

A few of the biggest IPOs in history include Facebook, Visa, and General Motors. And in 2014, Alibaba smashed the record, with its debut on the New York Stock Exchange bringing in $25 billion.


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All that said, going public has its drawbacks. Publicly traded companies are subject to oversight by regulators like the U.S. Securities and Exchange Commission. And once you list your company on an exchange, you’re not just reporting to yourself anymore, you answer to all those shareholders. If you don’t make them happy, you can be sidelined, or even fired, from the company you founded.

Thanks for Reading the Article. Hope you enjoyed reading it and got some information on IPO. Do comment your thoughts on this. Stay Tuned for more.

Source: CNBC
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SoftBank to acquire majority stake in WeWork.

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SOFTBANK to Acquire WeWork

SoftBank a Japanese telecoms and Internet Company, which is very intimate and well known for funding and acquiring stakes in various Multi National Companies. SoftBank is about to take over around 50 percent of the company WeWork.

WeWork is an American company founded in 2010 by Adam Neumann and Miguel McKelvey that provides shared Workspaces and Offices to Technology Startups and services for entrepreneurs, freelancers, and startups, small and large Businesses.

SoftBank shares fell 5.4 % and suffered their biggest one-day drop in nearly two years on Wednesday (10 Oct 18′) partly on concerns about the prospects of eight-year-old WeWork whose outlook is tied closely to the ups and downs of the real estate market. Recent technology sector weakness also weighed on SoftBank’s shares, traders said.

WeWork_workspace

One of the sources told that the pricing and other details of WeWork investment are yet to be firmed up and the second source said Softbank is in talks to take a major investment in WeWork.

SoftBank and its giant Vision  Fund invested about $4.4 Billion August 2017 on WeWork and hold 2 board Seats in the Company. And Owns about 20 percent of the company.

Earlier the Wall Street Journal reported Softbank’s investment would be between around $15 billion to $20 billion and is most likely to come from the Softbank’s giant Vision Fund. Earlier June Journal says that the smaller Softbank investment discussion valued WeWork at up to $40 Billion.

wework_image

SoftBank’s other real estate-related investments include Compass, an online real estate marketplace, Katerra, a construction startup, and Indian hotel chain OYO Hotels.

SoftBank Group Corp, Tokyo Stocks

Image Courtesy: Reuters

SoftBank had earlier invested Billions of Dollars in U.S. ride-services firm UBER Technologies but owns a minority stack in the firm.

The Chinese unit of WeWork raised about $500 million in July from the investors including Hony Capital, SoftBank, Trustbridge Partners, to drive and expand its existence in the nation.

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Drop in shares of Tesla after SEC charges CEO Elon Musk with Fraud

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Elon Musk

On the last Thursday, Tesla shares dropped more than around 13 percent after the US Securities and Exchange Commission filed securities fraud charges against Chief Executive Elon Musk.

According to SEC, the tweets posted by Elon Musk were ‘false and misleading‘ and so files fraud charges against Musk. Musk Tweeted on August 7, that he had secured funding for taking the Company private at $420 per share.

 

Security and Exchange Commision said that the tweet let to the “Significant Market Disruption” is seeking civil penalties without noting an amount and to bar Elon from serving as an officer of a Public Company.

That Thursday afternoon Musk sent a statement calling it as an unjustified action.

The statement that Musk gave:

“This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

Elon Musk tweeted in August for considering taking the company Tesla private, which was not embraced by the Tesla board members and many shareholders, and eventually arouse SEC to investigate.

Later on August 24, after the news of the SEC quest had become known, Musk blogged here that the Tesla will remain a Public Company.

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How Elon saved SpaceX and Tesla from Bankruptcy

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SpaceX & Tesla: you would be hard pressed to find two companies that are more popular today. And yet, in the not too distant past, both companies were basically unknown and were in fact simultaneously on the verge of bankruptcy. Today we’ll learn how Elon Musk did what no other American CEO had ever done before: he created and then rescued two companies at the same time and brought them both to multi-billion dollar valuations.
In the early 2000s Elon Musk achieved what any entrepreneur would dream of achieving: he successfully sold his company for over a billion dollars. He personally received $165 million, and now this is where most people would call it quits, but for Elon this was just the beginning. He wanted to change the world for the better, and one of his ideas was to send a greenhouse to Mars in order to boost public interest in space exploration and hopefully increase NASA’s budget. The idea was outlandishly ambitious, especially because Elon wanted to spend no more than $20 million on it. Now at the time, sending just 500 pounds to orbit could easily cost upwards of $30 million, but Elon had a plan. He travelled to Russia, where he tried to buy refurbished Intercontinental Ballistic Missiles. But the lowest price the Russians gave him was $8 million a piece, about 50% above his budget for the rocket itself. On the way back from Moscow, Elon did some back-of-the-napkin calculations and he figured out that the raw materials used in the making of a rocket were only about 3% of the final sales price.
Instantly, Elon knew what he had to do if he wanted to send anything to Mars, he’d have to build himself a vertically-integrated rocket company. To that end, he read several books on rocketry from the Cold War and in June 2002 he incorporated Space Exploration Technologies, or SpaceX for short. He then set about recruiting the right people who could make his vision a reality: his ideal candidate was young, single, educated and ready to give up his social life for SpaceX Elon’s recruitment strategy was very straightforward: he’d basically call up anyone fitting that profile, from fresh aerospace graduates to the rising stars in Boeing and Lockheed Martin. At first people thought Elon was making pranks, but within a year he had assembled some of the brightest engineers in America. Together they would design almost everything for SpaceX: from the engines and rocket bodies to even smallest details, like the circuitry. In many cases, the engineers could build stronger and more lightweight components at just a fraction of the regular price. These components would be used to build the Merlin engine, which in turn would power Elon’s first rocket, the Falcon 1. Development was far from smooth, of course, but nevertheless progress was being made.
But then, Elon decided to up the ante. In early 2004 he participated in the funding round of a new electric car company called Tesla. Elon personally invested a little over $6 million and in return became the chairman of the company’s board. Right off the bat Elon began applying his experience from SpaceX at Tesla. The company’s logo, for example, was created by the same people that made the logo for SpaceX. And of course, Elon was quick to use the same aggressive hiring strategy he used to assemble the SpaceX team. This time, however, instead of poaching employees from Boeing, he was hiring from Apple. Before long, the Tesla team was working on their first electric car, the Tesla Roadster. Back at SpaceX, engineers were clocking in 60-hour workweeks, while Elon was promising very ambitious timelines. In fact, his original estimate was to launch the Falcon 1 in November 2003, just 18 months
after the company was founded.
Of course, that estimate got pushed back, and the Falcon 1 wouldn’t lift off until March 2006, when it spent a total of 41 seconds in the air before crashing down violently. Like for SpaceX, 2006 was a big year for Tesla. In July, the Tesla Roadster made its first official appearance and recorded 100 pre-orders in its first day.  But, like with the Falcon 1, the actual production wasn’t going very well. Tesla’s CEO at the time was Martin Eberhard, and like Elon he was promising unrealistic timeframes. At first, the idea was to deliver the Roadster in early 2007, but an escalating series of production issues pushed the release date farther and farther away.  In the end, Martin’s mismanagement of the Roadster project got him ousted from the very company he had founded, leaving Elon in charge of everything. With full responsibility over both companies, the stress was starting to pile up. Elon witnessed the second failure of the Falcon 1 rocket, which didn’t complete its only 2007 flight. At Tesla, Elon struggled fixing the mess left behind by Eberhard, and in fact, the Roadster’s production would not begin until March 2008.
But then, things got worse: in August, Elon launched his third Falcon 1, which never made it to orbit and then just one month later his wife publicly announced their divorce. Both of Elon’s companies were struggling to make a viable product and were running out of money fast. In fact, by late October Tesla had only $9 million left to fund the entire company. Salaries were being delayed and Elon was faced with a choice.  He had already spent $70 million on Tesla and $100 million on SpaceX. With what little he had left, Elon had to choose whether to fund and secure the future of one company or to risk everything and gamble on saving both. Fate gave Elon little time to think: the fourth and potentially final flight of the Falcon 1 was approaching. On September 28th, Elon got ready for his last chance to survive. He stood in the SpaceX control center in LA and waited in silence. Then, the rocket took off, and the center burst out in ecstatic applause. SpaceX had finally delivered a working product: the Falcon 1 became the first privately-developed rocket to go into orbit around Earth. But Elon wasn’t in the clear just yet that a working product would mean nothing if the company behind it went bankrupt. In a frantic scramble, Elon had to figure out funding solutions for both his companies before the end of 2008, and the timing couldn’t have been worse. One of the largest American banks, Lehman Brothers, had collapsed and the global economy was heading towards disaster.
In the midst of this, Elon was raising all the personal funds he could to save Tesla: he liquidated his few remaining assets and even got his cousins to pitch in. But getting investors on board doesn’t happen overnight, and December was creeping in. Elon had managed to scrape together $20 million himself, another $20 million from various investors and $50 from the German car company Daimler. Days before Christmas, it seemed as if only Tesla was going to make it, but then on December 23 Elon received a very unexpected call: NASA had awarded SpaceX with a $1.6 billion contract to resupply the International Space Station. Then, on Christmas Eve, the Tesla deal went through. Elon had successfully saved both companies from bankruptcy. In later interviews, he’d recall these final days in December in painful detail. He’d admit that this was the closest he had ever gotten to a nervous breakdown and honestly, any lesser man would’ve outright given up. So regardless of the struggles Elon might be facing today, it’s worth knowing that ten years ago he overcame the impossible. This story is just a brief chapter in the journey of Elon Musk. You can read the complete story of his life in his autobiography which is even more facinating.
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