Traditional vs. Online IPOs
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The paper looks at Google's Dutch auction initial public offering (IPO) and describes how the demand for investors was lower than what the company expected, and this resulted in disadvantages for the company. The paper also looks at the case of Morningstar as an example of how Wall Street companies discouraged corporate clients to use electronic auctions for their initial public offering. The paper discusses how traditional IPOs are less risky for companies and so in the case of Skype, it would be better if the company reduced the risks of its IPO auction, even if this means increased costs. The paper therefore concludes that Skype should orient towards a traditional IPO auction.
Skype IPO Auction
Skype IPO Auction
From the Paper:"Skype is a company created for the community in the first place. This is the reason for which Skype was acquired by E-Bay. However, the acquisition did not have the success that E-Bay hoped it would have. Taking into consideration Google's IPO, one would think that an online auction would be more suitable for Skype, given its relationship with the community. It would be more profitable if Skype issued traditional IPOs.
"Google went to the same situation when auctioning its IPOs. The company also led to increased speculations regarding the type of IPO auctioning. Although Google seemed to become a public company in a traditional manner, the company decided to organize an auction available to all bidders (Christie, 2004).
"The result of what specialists in the field called unusual auction for Google was the following: the demand for investors being lower than what the company expected, Google was forced to significantly reduce the price of its initial public offering.
"Google's owners thought they would revolutionize the field by introducing a so-called Dutch auction for its shares. The company's owners were counteracted by several factors that were not taken into consideration sufficiently when deciding whether to select a traditional or a Dutch auction for Google's initial public offering. These factors include: market forces, owners' errors made in this process, and the Wall Street opposition."
Sample of Sources Used:
- Christie, L. (2004). The ABCs of a unique IPO. CNN Money. Retrieved August 28, 2010 from http://money.cnn.com/2004/04/29/technology/googleauction/.
- Vise, D. (2004). Google Ends Auction for IPO Shares. The Washington Post. Retrieved August 28, 2010 from http://www.washingtonpost.com/wp-dyn/articles/A10478-2004Aug18.html.
- Smith, R. (2005). Why IPOs Still Use the Old Way. The Wall Street Journal. Retrieved August 28, 2010 from http://www.wrhambrecht.com/about/media/20050706wsj.pdf.
Cite this Analytical Essay:
Traditional vs. Online IPOs (2013, April 04) Retrieved May 25, 2020, from https://www.academon.com/analytical-essay/traditional-vs-online-ipos-152623/
"Traditional vs. Online IPOs" 04 April 2013. Web. 25 May. 2020. <https://www.academon.com/analytical-essay/traditional-vs-online-ipos-152623/>