Workbrain Corporation - Evaluation of IPO Decision & Reviewing Alternatives

Workbrain Corporation - Evaluation of IPO Decision & Reviewing Alternatives

Introduction

Amongst the software industry in the Canada, Workbrain Corporation is one of the most growing firms. It is a Toronto based organization, having sales of about $30 millions in the year 2003. The company has human resource of about 300 people. Workbrain Corporation is headquartered in U.S. as U.S. holds a significant share in providing them revenues.

The company that has evolved in a very short period of time has not only penetrated in the market but also has earned laureates from various sources such as Forbes, etc. Workbrain Corporation provides their customer with customized workforce management systems basically. These systems help their customers to solve their major problems, streamlining their operations, enhancing their efficiency & effectiveness with a cost-effectiveness advantage. The competitors such as Oracle and SAP are focusing mainly on Enterprise Resource Planning (ERP) systems which are seen by the organization much costly, take more deployment time and require exhaustive training of employees to work with it. Most significant was Kronos, which is already listed in NASDAQ.

The factors differentiating the Workbrain Corporation from others in the industry are there vivid growth and expansionary plans. The company has achieved for about 350% compounded annual growth rate from time interval of 2000 till 2003 (Rosenberg, 2007). It has recently acquired Workbrain Logistics Incorporation in April, 2003. Its acquisition will help the company in automating the employee's scheduling processes.

Discussion

Initial Public Offering Decision

Initial Public Offering (IPO) is a strategic decision triggered by various reasons. One of most important reason is a need of funds or capital for long-term. Raising such capital is required to fuel the firm's growth and expansion. IPOs may be placed for needs such as to augment the company's repute, enhancing the liquidity status and acquiring various skills & expertise by giving an ownership opportunity to a large group of people. IPO is a way through which an organization goes public for the first time i.e. its shares are listed and traded in an organized exchange (Draho, 2004). IPO alters an organization's holding structure, extracting fruits of scattered group of people holding an ownership share in the company which was a priori held by a small congested group.

Workbrain Corporation is held by clustered groups. The founder has contributed approximately $1 million through ordinary equity. The business has raised capital of about $4 million in the year 2000 from business angels. Edgestone Capital, an institutional investor, has invested US$8 million along with individual investors. Venture capitalists such as Deutsche Bank Alex Brown and Accenture Technology Ventures also enjoy a share in the ownership of the company.

Apart from the benefits reaped from an initial public offering, there are some demerits of it too. They shall be considered while determining whether a firm should go public or not. One of the major demerits related to IPO is the costs-associated with it. The direct costs i.e. floatation costs, cost paid to investment banker or underwriter, auditors, ...