INITIAL PUBLIC OFFERING:
WRITTEN BY: Edward N Towah
FI 516 Advance Managerial Finance
Presented to: Miriam Benard, Instructor
June 2, 2012
The purpose of this paper is to select a publicly-traded company that has had an Initial Public Offering (IPO) within the last 10 years and discuss its impact on the company. The discussion will focus on how successful was the company in raising capital through its IPO. Further, it will elaborate on what had happened since the IPO and the trend of the stock price. It will summarize the financial conditions of the company since its IPO ...view middle of the document...
Currently, the company has an employee size that is approximately 50 to 100 employees and annual revenues/sales of $10 million to $25 million. The company is in the Electromedical and Electrotherapeutic Apparatus industry (Electromed.com 2010).
The Initial Public Offering (IPO)
On August 13, 2010, Electromed, Inc, which is a leader in developing innovative airway clearance therapy products for use by patients with compromised pulmonary function, announced pricing of its initial public offering of 1,700,000 shares of common stock and an additional 200,000 shares of common stock at a price of $4.00 per share, before underwriting discounts and commissions.
The announcement of the IPO and its method of offer can be seen below as per the release:
“The offering is expected to close on August 18, 2010, subject to the terms and conditions of the Purchase Agreement between Electromed and Feltl and Company, Inc., who is acting as the underwriter for the offering. In addition, the underwriter has a 45-day option to purchase up to an additional 255,000 shares of common stock to cover over-allotments, if any.
Electromed’s common stock will be listed on the Nasdaq Capital Market and will trade under the symbol “ELMD.”
The offering is being made solely by means of a prospectus. A copy of the final prospectus relating to the offering may be obtained, when available, from Feltl and Company, Inc. at 2100 LaSalle Plaza, 800 LaSalle Avenue, Minneapolis MN 55402, (612) 492-8800. A registration statement relating to these securities was declared effective by the Securities and Exchange Commission on August 12, 2010”.
The IPO was successful in raising $7,600,000 (1,700,000 + 200,000 x $4.00) and payment of underwriters’ discounts and commissions and offering expenses, thus net proceeds from the sale of shares in the IPO, including the overallotment option, were approximately $5,946,000 and outstanding shares of 7,816,367 (Electromed 2011 10-K).
Prior to the IPO, the company revenue for 2010 was $14,304,000. Its total assets, liabilities and stockholders’ equity were $14,143,237, 4,680,623, and $7,462,614 respectively. Similarly, the operating expenses and net income for 2010 were $8,582,324 and $933,536.
In comparison to fiscal year 2011, revenue increased by $4,700,000 or 32.9% from $14,304,000 to $19,004,000 in 2011. The total operating expenses and net income increased in 2011 by $3,325,273 or 38.7% and 4122,041 or 13.1% to $11,907,597 and $1,055,577 from $8,582,324 and $933,536 respectively in 2010. One would wonder why the increases during 2011.
Those increases indicated above came about due to several reasons. The first reason relative to revenue was due to expansion of sales and sales personnel. The creation of the company’s own sales force along with other outside sales force propelled the volume of sales. The increase in total operating expenses was primarily driven by the increase in size of the sales force and...