From the course: Corporate Finance Foundations

Unlock the full course today

Join today to access over 23,200 courses taught by industry experts.

Initial public offering (IPO): Microsoft

Initial public offering (IPO): Microsoft

From the course: Corporate Finance Foundations

Start my 1-month free trial Buy for my team

Initial public offering (IPO): Microsoft

“

- When a company offers its shares to the public for the first time, the event is called an IPO, or Initial Public Offering. Because there is no active buying and selling before the shares are listed publicly, an initial price must be set just to get things going. This initial price is set by the listing company and its financial advisors. Let's take a look at an example of a company that went public a little more than 30 years ago. Microsoft went public on March 13th, 1986. The company had been operating since 1975 as a privately held company. A number of employees had been given shares as part of their compensation, but there was no market in which to trade those shares. Now, in 1985, the year before the IPO, Microsoft had earnings per share of $1.10. At the time of Microsoft's IPO, there were several other software companies that were already publicly trading. Those companies, on average, were trading at a PE ratio, or price to earnings ratio, of about 15. In other words, the…

Contents