INITIAL PUBLIC OFFERING

Initial Public Offering



Initial Public Offerings

Introduction

The study is related to the Avaya Corporation, who wants to go public that is the company intends to issue shares to the public. For this purpose, the company will use the initial public offerings; however, the executives of Avaya Corporation are working on the options that are being considered for the initial public offerings that are traditional initial public offering or the online auction of the shares.

Discussion

Initial public offerings are normally conducted in small companies that want to raise additional capital for expansion, but can also be made by large private companies like in the case of Avaya Corporation who wish to obtain the status of publicly traded. In implementing the IPO Avaya Corporation receives assistance from the firm's underwriter that is the bank, which helps determine what security should issue, the best price and timing of public offerings on the market. 

For Avaya Corporation, initial public offering can be a risky investment. For the individual investor is difficult to predict how stocks will behave on the first day of trading in the near future, because usually there is a large array of historical data on which to analyze the company. In addition, Avaya Corporation spends undergoing a period of growth that leads to additional uncertainty regarding their future value (Richard, 2007).

Enticed by huge run-ups in the stock prices of Avaya Corporation that wants to go public, owners and partners in privately held firms consider an initial public offering (IPO) as the road to riches. Many companies pursue IPOs as a means to increase the amount of available financing to the company and possibly generate billions for the owners in the process. There is many a bump, detour and dead end on that hoped for the path to bundles of stock market cash and too many companies that think they prepared for the big time with a New York Stock Exchange or Nasdaq IPO may be far from ready (Paul, 2009).

Traditional IPO

Money to grow the business

Through traditional initial public offering, with an infusion of cash derived from the sale of stock, the Avaya Corporation may grow its business without having to borrow from traditional sources, and will thus avoid paying the interest required to service debt. This "free" cash spent on growth initiatives can eventuate in a better bottom line (Varaiya, 2007). New capital may be spent on marketing and advertising, hiring more experienced personnel who require lucrative compensation packages, research and development of new products and or services, renovation of physical plant or new construction and dozens of other programs to expand the business and improve profitability.

Money for shareholders and others

In traditional initial public offering, with more cash in the Avaya Corporation coffers, additional compensation may be offered to investors, stakeholders, founders and owners, partners, senior management and employees enrolled in stock ownership plans. Avaya Corporation stock and stock options may be used in an effective incentive program. In recruiting talented senior management personnel, stock and options are an attractive inducement (Lubos, 2007). For employees, a performance based program of stock and or option bonuses is an effective means ...