What is it?
An IPO is an initial public offering, meaning it is the first sale of shares by a company to the public. Companies offer an IPO either when they are starting out and need to raise capital or when they have been in business for a longer time but have not yet gone public and need more operating funds. IPOs can be risky investments but can potentially be very lucrative. Once an IPO occurs, the company will be listed on a major stock exchange and the shares will be traded immediately. The shares will normally be valued by the stock market in relation to the expectations of the future earnings of the company.
Why is it in the news?
Due to the financial crisis, IPOs have not been not very popular for the last few years. In 2010, however, there has been an increase in the number offered. Renaissance Capital’s IPO Home Website tracked 57 of them in the first half of 2010 and they raised over $8.5 billion for the companies that offered them. That is 350% more than was raised in the first six months of 2009. Not all IPOs are great business deals, but the more successful ones provided returns of between 13 and 35% to their investors.
How can I use it in class?
These numbers come up in the Bloomberg text. Ask students to look at the numbers (1–6) and match them to the topics (a–f) they think the numbers relate to. Students can then read the text and see how many they got right.
1. $6.3 billion
a. the number of subscribers to the Daily Deal website in Chicago
Ask students to match these words (1–10) from the text to their meanings (a–j) below.
a. a web-based service which allows individuals to create personal, professional and private networks
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