ShmoopTube

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Finance a la shmoop what does it mean to go public and to be

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clear this is not about going in public that sort of thing can give you 30 days [Man urinating in public and officer arrests him]

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in the county jail this is about taking your company public and pretty much all

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companies start out as private, well they have a small handful of little investors [seven dwarves bringing bags of money to poisonapple.com]

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they don't need tons of capital to get going and they're not really subject to

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deep complex federal laws and regulations but companies grow up and typically have

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their sights set on larger markets more complex and expensive products and

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broader distribution power and for most companies that requires raising outside [Man holding up a share from a cart]

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capital big capital additionally most early investors want to be able to sell

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at least some of their shares likely at a huge profit and have what's called

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liquidity i.e turning their private difficult to sell shares into easy to

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sell liquid shares in a public company meaning that if they want to sell some [Man on cellphone outside Morgan Stanley building]

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shares all they have to do is call Schwab or Fdelity or Morgan Stanley or

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whoever and yell sell Mortimer sell into the phone which is really weird anytime

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[Man yelling sell Mortimer to another man on a cellphone] the guy's name isn't Mortimer but you get the idea so when a company goes

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public it means that they have agreed to follow federal laws and regulations

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things like adhering to standard accounting practices called GAAP they

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agree to file financial reports in a standard format that conforms to the way

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in which everyone else files they agree to have a board of directors and so on [woman using a sewing machine]

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so yeah there's a downside too a private company sometimes dilutes itself by

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printing more shares that they can sell to the public like suppose organic

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muffin group Inc has a total of 80 million shares and it's totally private [Man eating muffins in Organic Muffin Group Inc]

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well the company decides for whatever reason it wants to go public and it'll

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sell twenty million shares to new investors you know Ma, Pa Kettle, Joe [Company selling shares to new investors]

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Sixpack err Moisha Cardiologist yeah well once the company has buyers for those 20

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million shares it begins to trade publicly now having sold 20 million

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shares that err say 15 bucks a share so OMG oops didn't think that one

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through now the company has a hundred million shares total outstanding and

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just raised 300 million dollars in cash - well the total value of the company is [total value of company on chalkboard]

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a hundred million shares times 15 bucks or 1.5 billion dollars but now it's

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public so it shares our liquidly traded ie anyone can now buy shares of the [dog running from building with a bag of money]

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thing the early investors and founders can sell their shares after what's

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usually a six month the cooling period the moral of story going public can be a [Men sat waiting in a 6 month cooling period area]

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good thing for everyone involved both the company its commission taking

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bankers and all of that companies investors going in public however is [Company, Banker and Investor all smiling]

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only good for the guy with a cell phone camera and a YouTube account

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