Dylan Guss and Jason Rosenfeld
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Private vs. Public
Most companies are private
• Small family business with some exceptions (e.g.
Mars)
Usually, private businesses have fewer
shareholders (that are partners or limited
partners)
 Private company structure examples:
partnership, limited liability company
(LLC)

General Partnerships are run by the
general partners
 These partners have full liability for the
partnership’s actions, even if they were
not explicitly involved
 To avoid legal problems, partnerships
will become Limited Liability Companies

Stands for “Initial Public Offering”
 A formerly private company will sell
shares to the public on a stock exchange
 This process places an additional layer
of regulation on the company
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NYSE, NASDAQ, AMEX, London, etc.
About 18 major exchanges
 To
create a liquidity event for its
investors
 To diversify the portfolio of the investors
so as to reduce risk
 To raise capital so as to increase equity
and value
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Disclosure
Accounting transparency
Costs for legal and accounting
Exchange listing fee (yearly)
Find investment banks
 Communicate with the banks as they
value your company
 The investment bank creates a
prospectus for the company’s new
security issuing
 Executives travel globally to put on a
“roadshow”
 The investment banks find clients for the
new security

Assigned IPO luncheons of possible firm
investments
 Skim prospectus
 Attend roadshow

• Specifically noting: Attendance, Questions
asked, Management Predictions

Report to research staff

Underwriters
• BofA Merrill Lynch, Morgan Stanley, etc.

Valuation: Between $17.00 and $19.00
• Eventually priced at $20, now at $13
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Risk Factors involved
• Stagnant Innovation, Reputation tarnishing/
Sponsorship Maintenance, International
expansion risk