Interchange Corporation of Laguna Hills, California, operates a targeted search advertising network. Its primary competitors are Google and Yahoo. Last year, Interchange reported a $60,000 profit on sales of $8.7 million. The company’s founders want to take Interchange public. The IPO market is beginning to heat up again, and many companies in competitive industries need both the capital and the perception of credibility offered by being publicly held. A few relatively recent, high-profile offerings may provide ample coattails on which Interchange’s stock could ride. Yet the risks of taking a young company, particularly a technology company, public remain high. The demand for technology companies has not fully rebounded, and the prices of the 60 technology companies that offered stock last year suffered an average decline of 5% over the same period. Also, it is particularly difficult for investors to predict the success of young companies with inexperienced management teams.

If there is a market for the offering, should Interchange go ahead with the IPO?

Should it matter whether Interchange is operating at a loss?

Should companies offer their stock publicly simply because the public is willing to purchase it?

What other factors should be taken into consideration?

Given that Interchange is short on cash, should it offer its outside counsel a 5% equity share in lieu of traditional hourly fees?

Answer rating: 100% (QA)

Deciding whether Interchange Corporation should proceed with an IPO involves considering several factors Lets examine each question and discuss the relevant considerations If there is a market for the ... View the full answer