Page 223 - Finance for Non-Financial Managers

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Finance for Non-Financial Managers
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Investment banker An individual or firm that assists com-
panies in raising money, by finding private investors, acquiring
companies, or selling a company’s shares in the public mar-
ket, such as in an IPO.All major securities firms (stockbrokers to most of
us) also conduct investment banking activities, a situation that has
raised charges of conflict of interest in the last few years because they
sell stock of companies that they are also recommending to their
clients.This is causing changes in this segment of the marketplace.
start-ups that get funded by professional investors will not likely
be good enough to become IPO stocks—the actual numbers are
even more daunting. And of those that do, many will deliver
less stellar performance than projected in their IPO offering liter-
ature. Some of them will sink to market prices below their IPO
price, while others will languish with modest returns and sort of
disappear into the haze
Don’t Count without ever making a sig-
on an IPO nificant impact on the
It would be simple if any market.
company could just go public. Still, the exhilarating
Unfortunately, it takes more than prospects of making it big
mere desire—and few succeed.The in that breathtaking game
most likely candidates for an IPO are gives company owners
companies in industries that are hope. Along the way, they
hot—according to the whims of the
stock market—and companies that are aided by the coaches
are expected to reach revenues and advisors, the
upwards of $100 million quickly. investors, consultants,
accountants, lawyers, and
a variety of others, because everyone wants to play in the big
game. And everyone believes it can happen to them—and no
one knows for sure, until they take their shot.

Strategic Investors: The Path to a Different Party

So let’s do a little guessing here. There are an awful lot of com-
panies that start up every year; even if only 5% of them stay in
business, that would still be a big number. If only 10% of them