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160 lines
5 KiB
Org Mode
#+title: Section 11 | Lesson 64 - how an IPO works
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#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/org-media-sass/categories/business.css" />
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#+OPTIONS: H:6
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* Links
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- [[./../mba-main.org][TOC | Business]]
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- [[https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/learn/lecture/4315046#overview][S12:L64 course video]]
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* notes
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** Mary Meeker – Internet Trends Report
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Mary Meeker, formerly a partner at Kleiner Perkins, is known for publishing the Internet Trends Report, one of the most influential annual reports on internet usage, the digital economy, and technology adoption.
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*** Key Facts
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- Report Name: Internet Trends Report (also known as Meeker Report)
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- Published: Annually, starting in the mid-1990s
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- Content includes:
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- Global internet usage
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- Mobile trends
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- Digital advertising
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- E-commerce
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- Social media growth
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- Emerging technologies such as AI, cloud computing, and voice interfaces
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- Originally released by: Kleiner Perkins
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- Later reports released by: Bond Capital (Meeker's own VC firm, after leaving Kleiner Perkins in 2018)
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** how to value companies without revenue
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- valuation for high tech companies without revenue is based on subscribers
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*** facebook vs instagram
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**** facebooks value for subscribers
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\begin{equation}
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\text{value per Subscriber} = \frac{\text{Facebook Market Cap}}{\text{Facebook Users (Subscribers)}}
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\end{equation}
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\begin{equation}
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\text{value per Subscriber} = \frac{\text{\$231,000,000,000}}{\text{1.4 billion subs}}
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\end{equation}
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\begin{equation}
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\text{value per Subscriber} = \text{\$165 per subscriber}
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\end{equation}
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**** instagram value for subscribers
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\begin{equation}
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\text{value per subscriber} = \frac{\text{instagram acquisition price}}{\text{instagram subs}}
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\end{equation}
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\begin{equation}
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\text{value per Subscriber} = \frac{\text{\$1,000,000,000}}{\text{100,000,000 subs}}
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\end{equation}
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\begin{equation}
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\text{value per Subscriber} = \text{\$10 per subscriber}
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\end{equation}
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*** whatsapp
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- facebook is mostly first world companies
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- whatsapp has penetration in third world
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- facebook messenger sucks ass
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**** change in growth rates
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- facebook was losing subscribers
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- whatsapp was growing
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**** subscriber value
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- number of subscribers :: 700,000,000
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- price bought :: 20bn
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- price / subscriber :: 28$
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** valuation methods depend on the industry
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*** short term drivers based on company
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| industry | driver |
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|--------------------+-------------------|
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| consumer tech | subscribers |
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| enterprise tech | revenue |
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| semiconducter tech | earnings |
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| hotels | revpar |
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| industrials | earnings & volume |
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| telecommnications | arpu |
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| retail | earnings & SSS |
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| biotech | FDA approval |
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**** definitions
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- revpar :: revenue per available room
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- arpu :: average revenue per users
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- sss :: same store sales
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**** notes
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- same store sales
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- investors want to see that the individual stores grow organically
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- e.g. mcdonalods started staying open all day, and profits skyrocketed
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- fda approval is necessary for biotech
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- no approval no profit
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- once you get it, it's printing money
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- stocks go up or down a ton depending on approval
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*** long term drivers
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earnings and cash flow
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*** additional valuation methods
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** example of IPO
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1. microsoft offers to buy company for 1bn
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- reject it bc too low
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- want to go big
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2. talk to our VC Sequoia for advice
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- they recommend we talk to Goldman sacks
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3. Goldman Sacks recommends we bring in other banks
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- reasons
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- this going to be a large IPO
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- Sequoia wants to spread it out
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- we will have a better job negotiating a good deal if we have more banks
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- banks
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- Morgan Stanly
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- UBS
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*** Goldman Sacks Divisions
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**** Investment Bankers
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- underwrite the IPO
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- legal documents
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- excel valuation
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- what valuation you should use
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- list all the risks "IPO Perspectous"
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- all risks have to be disclosed
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- also called an S-1
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**** Equity Capital Markets (ECM)
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1. write 20 page sales memo for the GS sales team
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- condense information in the S-1 Perspectous
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2. train sales team how to market the deal
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- pros & cons
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- always bring up the risks
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- integrity is key
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3. call clients
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- mutual funds
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- Fidelity
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- Citadel
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- hedge funds
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4. after orders are submitted ECM decides how many share each client gets
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- Goldman and the company doing the IPO negotiate on this
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- Goldman will fight for their own clients
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- companies typically want long term shareholders
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- the clients who understand them
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- companies can always track investors who sell shares
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- SEC law that mutual funds have to disclose every three months what their long positions are
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- companies that don't flip tend to get more shares
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5. Traders then distribute shares to the clients
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6. Goldman wires the IPO proceeeds to the company minus the fees.
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