THE ADVANCED GUIDE TO

SLIDE 1
MERGERS & ACQUISITIONS
DISCUSSION QUESTIONS

COURS
E
 SECTION 2
The Life (and Death?) of a U.S.
LECTURE LECTURE
Public Company
LECTURE LECTURE
1 2 3 4
Birth of a Birth of a
Birth of a Private vs.
Business: Business:
Taxation, Liability Business: C Public
Organizational
Corporations
& Delaware
LECTUR Forms LECTURE LECTURE
Companies
6 7
E5
Capital The Death (?)
Going Public! Structures of a Business
GOIN
DISCUSSION QUESTIONS

G
 IS
“GOIN
G
PUBLIC
 GOING PUBLIC!
“Going public” is
when a private
company becomes a
public company by
selling some or all of
itself to the public.
 GOING PUBLIC!
• It does this by issuing
(selling) shares of
common stock.
• Common stock represents
ownership in a company,
whether that company is
 GOING PUBLIC!
For example, Amazon has over 500
million shares of common stock
outstanding; if I purchased one share, I
would own (1/500,000,000) of the
company  0.000000002% of Amazon.
 GOING PUBLIC!
So, when a private
company “goes public”,
it’s selling an ownership
interest in itself to the
public  Public company
 GOING PUBLIC!
The first time a
company sells
common stock to
the public is
referred to as its
initial public
offering (IPO).
 WHY
GO
PUBLI
C?
Why
Go To raise
money in
Publi the public
markets
c? To
enhance a
To acquire
other company’s
companies reputation
with publicly To
traded provide
common liquidity
stock for
To attract
sharehold
and retain
ers
talented
employees
 WHY GO PUBLIC?
But the main reason
private companies go
public is to raise
money – lots of money
– by selling shares of
common stock to the
 THE
GOING
PUBLIC
PROCES
 THE GOING PUBLIC
PROCESS
The process of
becoming a public
company is expensive
and time-consuming.
 THE GOING PUBLIC
PROCESS
Going public is the process of
gathering the necessary data for
the Registration Statement on
Form S-1 (covered in Section 3,
Lecture 2), all the way through to
the “roadshow” and “pricing”.
THE GOING PUBLIC
PROCESS
This includes preparing the
required financial, marketing,
and business information, as
well as determining the
optimal tax and legal
structure, all of which are
vital steps in the process.
 THE GOING PUBLIC
PROCESS
The going public process ends
when the offering is sold and the
company and/or its shareholders
receive the proceeds.
 THE GOING PUBLIC
PROCESS
1. Collecting. Gathering data for
the required SEC filings.
2. Preparing. Preparing the
required financial, marketing,
and business information.
 THE GOING PUBLIC
PROCESS
3. Marketing.
Marketing the
offering with a “road
show”.
 THE GOING PUBLIC
PROCESS
4. Pricing. Setting the purchase
price per share for the offering.

5. Closing. The offering is sold to

the public and the company
receives the proceeds.
 STOCK
EXCHAN
GES
WHICH STOCK MARKET?
A company seeking to go public must
choose the market, geography, and
stock exchange that is right for its
stock.
 WHICH STOCK MARKET?
• Each stock exchange has specific entry
requirements regarding such factors as
earnings history, market capitalization,
number of expected shareholders and
corporate governance.
• Stock exchanges have their own set of
rules and regulations for public companies,
WORLD STOCK
EXCHANGES
BONU
DISCUSSION QUESTIONS

S
DEALS
OF
THE
DAY!
BOTCH
ED
IPOS
 BOTCHED IPOS
Not all private
companies are
successful in their
attempt to go
public…
 HARRAH’S
ENTERTAINMENT
 HARRAH’S
ENTERTAINMENT
• ISSUER. Harrah’s Entertainment
(now Caesar’s Entertainment Corp.)
• DATES. Oct 18, 2010 (Form S-1
filed); Nov 19, 2010 (IPO
withdrawn).
• IPO SIZE. $575 million
 HARRAH’S
ENTERTAINMENT
WHAT HAPPENED?
• Potential investors valued the company
at $3.3 billion, significantly less than the
value expected by its two largest
shareholders.

• One month after filing its Form S-1,

Harrah’s cancelled its IPO.
WEWORK
 WEWORK
• ISSUER. WeWork Companies Inc.
• KEY DATES. Aug 14, 2019 (Form S-1
filed); Sept 16, 2019 (IPO withdrawn);
Sept 24, 2019 (Neumann steps down
as CEO); Nov 21, 2019 (company lays
off 2,400 employees).
 $ $

$
$ WEWORK:
VALUATION
• AUGUST 2019. $47
billion

$$
• SEPTEMBER 2019.

$
$10 billion
• OCTOBER 2019. $5
 WEWORK: WHAT
HAPPENED?
WeWork’s Form S-1
revealed a long list of
alarming details about
the business and its
CEO and Co-Founder,
Adam Neumann.
 WEWORK: WHAT
HAPPENED?
• The company was generating losses in
the billions (for the first six months of
2019, the firm posted a loss of $690M on
$1.5B of revenue).
• Neumann trademarked the term “We”
and then forced WeWork to license it
from him for $5.9M.
 WEWORK: WHAT
HAPPENED?
Neumann’s common
stock had 20
votes/share, giving him
majority control over
WeWork that would
continue post-IPO.
 WEWORK: WHAT
HAPPENED?
The company
purchased a $60M
luxury private jet
that Neumann and
his family
personalized and
 WEWORK: WHAT
HAPPENED?
Neumann sold $700M of stock options
before the planned IPO (founders
typically wait to sell until after their
company goes public IF they believe
the value of their company will
increase).
 WEWORK: WHAT
HAPPENED?
Co-founder Rebekah
Neumann, cousin of
Gwyneth Paltrow, fired
multiple employees within
minutes of meeting them
because she disliked their
‘energy’.
WEWORK: WHAT
HAPPENED?
Rebekah was one of
three people with the
power to designate
Adam’s successor as
CEO.
 WEWORK: WHAT
HAPPENED?
• The company made multiple
personal loans to Neumann and to
his personal LLC at interest rates
below 1.0%.
• Neumann made millions by leasing
buildings to WeWork that he
 MORAL OF THE STORY?
• There’s a reason the SEC has disclosure
requirements!
• Don’t invest in a public company unless
you understand its business and how it
makes money.
• The best way to research a company is to
 NEXT
DISCUSSION QUESTIONS

UP: