During the last decade, private owned companies have decided to issue equity to the public in order to benefit from the cash influx; this process is known as an IPO or Initial Public Offering. Dairy companies are a very interesting case when looking at their IPO processes because they usually are owned not only by one person or a few people, in fact, they are owned by a lot of farmers that are in charge of delivering the products for the company. IPO processes have both advantages and disadvantages, in this paper we focus on one of the biggest disadvantage that comes with an IPO which is the loss of ownership (Beck and Demarzo, 2014, p.812). Ownership is very important to a dairy company because, as mentioned above, it has many owners, and
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The Corporate governance system is highly involved in an IPO, according to Beck and Demarzo (2014), the role of the corporate governance system is to mitigate the conflict of interest that results from the separation of ownership and control without unduly burdening managers with the risk of the firm (p.962) we evaluate how well Lala’s corporate governance system worked after the IPO and compare it with the one of Arla …show more content…
Introducing Initial Public Offerings
This paper focuses on corporate governance after an IPO and it is important to first define what an IPO is. When a company decides to sell stocks to the public for a first time, it is called an Initial Public offering (IPO), an IPO comes with advantages and disadvantages, they define two advantages for going public: Greater liquidity and better access to capital. The biggest disadvantage for the IPO process is the loss of control, (Beck and Demarzo, 2014, p.812) and that is when corporate governance is relevant when an IPO is being discussed.
According to Cuauhtemoc Villarreal (2013), companies have wide motivations for going public, some of the biggest reasons are that they are looking to get liquidity through the big initial influx of cash, they are looking to finance operations or acquire new equipment or they want to reduce their costs of capital. Before a company can go public, it has to go through a valuation and an initial price for the auction will be set. It is very common that throughout the first day of the IPO, this initial price will vary, usually this closing price will be higher than the initial price, and this is known as underpricing (p. 2) Later in this paper, we can see an example of underpricing when we focus on Lala’s
The Corporate governance system is highly involved in an IPO, according to Beck and Demarzo (2014), the role of the corporate governance system is to mitigate the conflict of interest that results from the separation of ownership and control without unduly burdening managers with the risk of the firm (p.962) we evaluate how well Lala’s corporate governance system worked after the IPO and compare it with the one of Arla …show more content…
Introducing Initial Public Offerings
This paper focuses on corporate governance after an IPO and it is important to first define what an IPO is. When a company decides to sell stocks to the public for a first time, it is called an Initial Public offering (IPO), an IPO comes with advantages and disadvantages, they define two advantages for going public: Greater liquidity and better access to capital. The biggest disadvantage for the IPO process is the loss of control, (Beck and Demarzo, 2014, p.812) and that is when corporate governance is relevant when an IPO is being discussed.
According to Cuauhtemoc Villarreal (2013), companies have wide motivations for going public, some of the biggest reasons are that they are looking to get liquidity through the big initial influx of cash, they are looking to finance operations or acquire new equipment or they want to reduce their costs of capital. Before a company can go public, it has to go through a valuation and an initial price for the auction will be set. It is very common that throughout the first day of the IPO, this initial price will vary, usually this closing price will be higher than the initial price, and this is known as underpricing (p. 2) Later in this paper, we can see an example of underpricing when we focus on Lala’s