1. In general, what attributes make a company a good candidate for an IPO?
While researching the internet for facts and information about what attributes make a company a good candidate for an IPO, I found an article on E-commerce that explained some facts and attributes. First, I found out some basics facts such as, a company doesn't have to have a particular level of sales and/or a consistent record of earning/cash flow to execute a successful IPO. It was interesting to find out that it isn't what your company "has" done, but more or "what" your company will do. If management's story is worth listening to, then maybe they can convince the market, that they know where they are headed, ...view middle of the document...
This example is known as a roll up, and will look really appealing to potential investors if a company can achieve large amounts of volume and expand profits.
I also did some research on the advantages and disadvantages for a company that is thinking about going public. For the advantages, one of the obvious benefits of going public would be the ability to raise capital for expansion. But, that is not the only way that capital can be utilized. Capital can also fund research and development, fund capital expenditure, as well as pay off some or all of the company's debt. Another one of the benefits derived from and IPO is the increased awareness of the intended and sometime unintended audience.
However, there are some challenges. For example, there will become a need for added disclosure for investors. Also, companies that go public become regulated by the Securities and Exchange Commission (SEC), and some of the smaller companies may not be able to survive the cost of having to comply with the necessary requirements. And, with the arrival of the Sarbanes-Oxley Act, that price has expanded. Pressures from the market can cause some companies to turn their attentions to short-term profits, rather than long-term growth. But the biggest risk or challenge that is faced by going public is the company's ability to retain its integrity. For example, management may feel pressure from the investors and act unethical to look successful.
So, when answering this question, I guess the company should have a stable history, sustainability, and a sophisticated management team that has developed an excellent business model that will show the company's ability to compete in adverse market conditions. Also, the company should be in a industry that can stand its ground and is on the upswing, and not one that is diminishing.
2. How does TRX compare on these dimensions?
I feel as though TRX did well when doing the comparison on those dimensions. For example, let's take the Management component, the case says that the CEO Trip Davis has had at least one year in the new ventures group of a large firm before founding a Web development technology-integration company for the travel industry in San Francisco in 1995. Also, when the company was acquired by iXL Enterprises, Inc., which was a rapidly growing Internet services firm, Trip joined to run the travel practice business. With help of three co-workers, Davis felt as though he had a strong team behind him. First there was Thomas Weisel LLC, they were known for its aggressive sales and trading efforts. The second and third, Legg Mason Wood Walker and Sun Capital Markets, Inc., who had both had a wide investor client base in the central and southern United States.
Let's look at the history of the company. In December 1999, TRX officially became a spinoff company. TRX spun off the company WTP, which was the third-largest travel agency. If you look at their Total Revenue Section of their Income...