No Marshmallows, Just Term Papers
Submitted by: Submitted to:
Mukesh Padwal Dr. Yogesh Maheshwari
CCBMDO Batch: 09 Financial Management - I (Oct-Nov’12)
Brief Case Analysis 1 October 22, 2012
Netscape’s Initial Public Offering
The Case: Netscape IPO
The Company: The case analyzes the Initial Public Offering (IPO) of Netscape Communications Inc., in order to recommend a justifiable share price for the IPO. Founded in April 1994, Netscape Communications Corporation provided a comprehensive line of client, server and integrated applications software for communications and commerce on the Internet and private Internet Protocol networks. The primary revenue generator for Netscape at the time IPO was it's Internet Browser, Netscape Navigator. In December 1994, Netscape Navigator generated 49% and 65% of total revenues for the quarters ended March 31 1995 and June 30 1995 respectively.
The Issue(s): It seems as if making money in these issues is easier than buying stock in the secondary market. Unfortunately many "hot issues" of IPOs produce a big chunk of their gains on the first day of trading. And most individual investors are not fortunate enough to get in on the floor of a promising IPO. The most attractive IPO’s are offered to certain clients first, mainly institutions, such as other corporations and pension plans, and big individual investors. Therefore it might be a good idea to buy an IPO once they begin trading on the secondary market. It is possible that the IPO after it begins trading could potentially produce a return similar to that of the average performance recorded by some small-cap stocks. When a stock first starts trading, its price will nearly always rise to an artificially high level. This might be because by then, investor demand which is often unusually heavy because of the hype surrounding an IPO and the strong selling effort employed by...