The value of a share of a public company is a representation of expected future revenues.
Whoa there. That's the kind of thinking that got us into this bubble in the first place. Replace "revenues" with "profits" and we'll be in better shape.
Note also that their underwriter has about as much legitimacy as they do. If you take a look at Capital West Securities' list of attempted IPOs, you'll see a pretty weak effort. Of the four registered IPOs:
- Holloman was never priced (1.5 years after the initial docs were filed) - Lorecom was withdrawn - Talisman Enterprises came out at $5 and closed down 12% (not easy in this frothy market) - LinuxOne - we'll see
Based on the above I just don't think that this deal is going to do much and might not even get out. Having said that, you never know what the magic incantation "Linux" can do in the markets (with a "China" thrown in for good measure).
IPOs are typically used to obtain working capital for business development. But the Palm series is already popular and profitable. It is helpful to remember that although an econ prof might once have taught you that companies go public to access capital to grow, there are in fact many reasons why a company will go public (even this is not all-inclusive):
The obvious - they want the cash for expansion.
Publicity - in this day and age, having a big IPO will get you a lot of free publicity.
Make management of the company a lot of $. In this case, doubtless the staff of Palm is clamoring for the IPO considering their parent's (3Com) stock has been going nowhere for a while now.
Help attract new management and staff through the ability to give them options for a stock that is already public.
Like I said, there are many more reasons, but these are the ones that seem applicable in this case.
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Right...
And if you don't pay it they send you to debtors prison.
Please.
Whoa there. That's the kind of thinking that got us into this bubble in the first place. Replace "revenues" with "profits" and we'll be in better shape.
- Holloman was never priced (1.5 years after the initial docs were filed)
- Lorecom was withdrawn
- Talisman Enterprises came out at $5 and closed down 12% (not easy in this frothy market)
- LinuxOne - we'll see
Compare that to Goldman Sachs or CSFB (underwriters for Red Hat and VA Linux, respectively; note the "next page" links) and you'll see a slight difference in the legitimacy of the lead underwriter.
Based on the above I just don't think that this deal is going to do much and might not even get out. Having said that, you never know what the magic incantation "Linux" can do in the markets (with a "China" thrown in for good measure).
The obvious - they want the cash for expansion.
Publicity - in this day and age, having a big IPO will get you a lot of free publicity.
Make management of the company a lot of $. In this case, doubtless the staff of Palm is clamoring for the IPO considering their parent's (3Com) stock has been going nowhere for a while now.
Help attract new management and staff through the ability to give them options for a stock that is already public.
Like I said, there are many more reasons, but these are the ones that seem applicable in this case.