5 ms·

I'm ignorant, but I'm sure many others here are too: How does one become a publicly owned/traded enterprise without an initial offering of one's shares to the

I'm ignorant, but I'm sure many others here are too: How does one become a publicly owned/traded enterprise without an initial offering of one's shares to the public?

Arnt 10y ago
Normally, the company creates a number of new shares when the company goes public, offers the new shares to the public and uses the income to... well, to do something. Existing shareholders typically promise not to sell their shares for six months or so. But it's perfectly possible to have some existing shareholders offer a few shares for sale instead of emitting new shares. Unconventional, and I'm sure some people disapprove of it for that reason, but perhaps the company doesn't need the cash and the existing shareholders don't want the dilution?
JumpCrisscross 10y ago
There are two stages to most American IPOs: registration and the initial public offering. Registration means your shares can be sold without relying on a Securities Act exemption [1], e.g. the rule which lets one sell private shares to accredited investors [2]. When you register, you have to start disclosing certain information, e.g. your financials, to the public. This is a hassle and expense most companies delay for as long as possible. Companies must register before an IPO; this is why registration and public offering are commonly conflated. "IPO" specifically refers to the process by which an underwriting bank buys shares from the company (including, potentially, current investors) at a certain price and then sells those shares to the public at a different--hopefully higher--price [3]. Some companies cut out the underwriters by directly offering their shares to the public [4]; this is less common. Spotify appears to be contemplating registering its shares but not issuing any new ones to the public. I presume this is to stop the bleeding from their TPG notes, which penalize them for not going public [5]. This would let existing investors more easily sell their shares. It would not raise new money for Spotify. Depending on the jurisdiction it chooses, reporting requirements may be lighter than the United States'. [1] https://www.sec.gov/fast-answers/answersregis33htm.html https://www.sec.gov/fast-answers/answersregis33htm.html [2] https://www.sec.gov/fast-answers/answers-rule506htm.html https://www.sec.gov/fast-answers/answers-rule506htm.html [3] https://en.wikipedia.org/wiki/Initial_public_offering https://en.wikipedia.org/wiki/Initial_public_offering [4] https://en.wikipedia.org/wiki/Direct_public_offering https://en.wikipedia.org/wiki/Direct_public_offering [5] https://www.bloomberg.com/gadfly/articles/2017-02-08/spotify-needs-a-little-help-from-its-friends https://www.bloomberg.com/gadfly/articles/2017-02-08/spotify...
- rwmj 10y ago
  How would the price be decided for the very first sale of shares? And before that sale, would there be a stock symbol with a "NULL" price? - I hope the stock market tested that corner case :-)
  - twic 10y ago
    I don't know about shares, but for fixed income securities, it's common to have a null price. I know this because my code is littered with checks for them!
deleted 10y ago
[deleted]
philipodonnell 10y ago
You could also use a reverse takeover where you purchase the assets of a smaller publicly listed company. >A reverse takeover (RTO) is a type of merger that private companies use become publicly traded without resorting to an initial public offering (IPO). Initially, the private company buys enough shares to control a publicly traded company. The private company's shareholder then uses its shares in the private company to exchange for shares in the public company. At this point, the private company has effectively become a publicly traded company. An RTO is also known as a reverse merger or a reverse IPO. http://www.investopedia.com/terms/r/reversetakeover.asp http://www.investopedia.com/terms/r/reversetakeover.asp

I'm ignorant, but I'm sure many others here are too: How does one become a publicly owned/traded enterprise without an initial offering of one's shares to the public?

Arnt 10y ago

Normally, the company creates a number of new shares when the company goes public, offers the new shares to the public and uses the income to... well, to do something. Existing shareholders typically promise not to sell their shares for six months or so. But it's perfectly possible to have some existing shareholders offer a few shares for sale instead of emitting new shares. Unconventional, and I'm sure some people disapprove of it for that reason, but perhaps the company doesn't need the cash and the existing shareholders don't want the dilution?

JumpCrisscross 10y ago

There are two stages to most American IPOs: registration and the initial public offering. Registration means your shares can be sold without relying on a Securities Act exemption [1], e.g. the rule which lets one sell private shares to accredited investors [2]. When you register, you have to start disclosing certain information, e.g. your financials, to the public. This is a hassle and expense most companies delay for as long as possible. Companies must register before an IPO; this is why registration and public offering are commonly conflated. "IPO" specifically refers to the process by which an underwriting bank buys shares from the company (including, potentially, current investors) at a certain price and then sells those shares to the public at a different--hopefully higher--price [3]. Some companies cut out the underwriters by directly offering their shares to the public [4]; this is less common. Spotify appears to be contemplating registering its shares but not issuing any new ones to the public. I presume this is to stop the bleeding from their TPG notes, which penalize them for not going public [5]. This would let existing investors more easily sell their shares. It would not raise new money for Spotify. Depending on the jurisdiction it chooses, reporting requirements may be lighter than the United States'. [1] https://www.sec.gov/fast-answers/answersregis33htm.html https://www.sec.gov/fast-answers/answersregis33htm.html [2] https://www.sec.gov/fast-answers/answers-rule506htm.html https://www.sec.gov/fast-answers/answers-rule506htm.html [3] https://en.wikipedia.org/wiki/Initial_public_offering https://en.wikipedia.org/wiki/Initial_public_offering [4] https://en.wikipedia.org/wiki/Direct_public_offering https://en.wikipedia.org/wiki/Direct_public_offering [5] https://www.bloomberg.com/gadfly/articles/2017-02-08/spotify-needs-a-little-help-from-its-friends https://www.bloomberg.com/gadfly/articles/2017-02-08/spotify...

rwmj 10y ago
How would the price be decided for the very first sale of shares? And before that sale, would there be a stock symbol with a "NULL" price? - I hope the stock market tested that corner case :-)
- twic 10y ago
  I don't know about shares, but for fixed income securities, it's common to have a null price. I know this because my code is littered with checks for them!

deleted 10y ago

[deleted]

philipodonnell 10y ago

You could also use a reverse takeover where you purchase the assets of a smaller publicly listed company. >A reverse takeover (RTO) is a type of merger that private companies use become publicly traded without resorting to an initial public offering (IPO). Initially, the private company buys enough shares to control a publicly traded company. The private company's shareholder then uses its shares in the private company to exchange for shares in the public company. At this point, the private company has effectively become a publicly traded company. An RTO is also known as a reverse merger or a reverse IPO. http://www.investopedia.com/terms/r/reversetakeover.asp http://www.investopedia.com/terms/r/reversetakeover.asp