Even if you weren´t familiar with the term IPO before last year, there´s a good chance that, by the end of last year, you either knew exactly what it meant or had felt or heard about the effects of dot-coms and IPO´s. Â In case you´re still not 100% sure what IPO means, it stands for Initial Public Offering and is also known as when a company "goes public". Â
According to What Is.com, an IPO is basically a "one-time only sale of publicly traded stock shares in a company that has been previously owned privately." Â Â Once an appropriate share price is determined, usually by a company that specializes in handling IPO´s, the IPO manager determines when the appropriate time is to sell at the determined offering price. Â When all of the shares have been sold, the stock is now tradable through the stock exchange and subject to market forces.
According to Shell Stock Review.com, the primary reasons that companies want to become publicly traded include:
Now that the industry has died down and Internet IPO´s are continuously being delayed, why am I bringing up the topic of IPO´s? Â To talk about reverse IPO´s...
The strategy behind Reverse IPO´s or Reverse Mergers has been around for a while and deal with the "financial re-engineering" of a company.
Basically, a Reverse Merger or IPO occurs when a privately traded company merges with or purchases the "empty shell" or shell stock of a poorly performing publicly traded one. The result is the elimination of spending extra time and money in hiring lawyers, underwriters, etc. and the creation of a new publicly traded company that didn´t need to undergo the growing pains of an IPO. Â Essentially, the privately traded company takes on both the assets and liabilities of the publicly traded one.
The main benefit to this action is the speed at which reverse IPO´s can turn privately held companies into publicly traded companies; the quick selling of shares to the public which at one point may have taken years but has now been reduced to perhaps weeks or months.
Last week, I wrote about the downsizing of IT workers and how downsizing trends have changed over the last 10 years. Â It´s no secret that companies are offering up the heads of their employees before allowing their shareholders to suffer. Â With reverse IPO´s, the shareholder priority continues as employees are often downsized accompanying the takeover. Â These newly formed, originally private companies have no obligation to retain the employees of the company that was taken over. Â Pretty much the only benefit that these downsized employees will receive is an increase in their share price. Â However, CEO´s will tend to justify their job loss situation by using the "rock and a hard place" analogy.
In the end, unemployment is still unemployment and when you compare a long career to a few extra dollars in your pocket, no matter how hard you try, it still doesn´t seem fair.