It may come as a surprise that 2015 is expected to be the best year for IPOs since 2000. An IPO filing can be intimidating for some business owners; however, opening a company up to investors can increase the value of its stock. In the case of some recent IPOs, they certainly have ? Fitbit, a company which originally offered over 36 million shared on June 16 with an asking price of $741 million, has seen its stock rise by 50% since. This is especially possible with the help of a hedge fund prime broker.
Why Is A Hedge Fund Prime Broker Necessary?
A hedge fund prime broker is involved in a number of roles concerning investments and IPO service. Prime brokers trade with executing brokers, and keeps all trade information in one place, making the process easier. They also fulfill other needs, handling the custody of the securities, as well as loaning securities for short sales, giving margin financing and back office technology or reporting. They handle things that can be difficult for those wishing to open their companies up with an IPO. By taking advantage of prime brokerage services, those interested in IPOs can expect to see a higher likelihood of success. And with that success comes competition ? competition that can be handled by hedge fund prime brokers. Finally, due to the fact that IPOs benefit hedge funds and investment banks willing to buy large amounts of stock before its debut, companies can have triple-digit gains on their first day of trading.
How An IPO Can Increase A Company?s Value
An IPO does not, as some mistakenly believe, mean offering up a massive part of a company. In fact, an IPO usually offers about 10 to 15% of a company for sale. This relatively small part of a company can increase its value in a major way. Some companies also open higher than their initially indicated price, drawing in all the more income to the company. Etsy, for example, opened up 94% from its initially indicated price; Shopify Inc. opened up 65% higher; and Fitbit opened up 52% higher.
IPOs: Not The Risk Some Imagine
In a country coming out of shaky economic times, it can be hard to persuade some companies to consider IPOs. The fact is that IPOs are not the big risks that some make them out to be. As long as the market is doing well, IPOs do well in turn. For example: if one imagines that the SandP 500 will be up by double digits next year, IPOs will likely be up and outperforming that number.
IPOs are undeniably a big step in a company?s lifetime. But the fact is that an IPO is a positive step, and if a company on the right track, stock value can be expected to increase, and the company?s overall value with it.