Just like Jarrod Chang mentioned in his blog [1], for many becoming an IPO for many is a sign of success or a fancy status a firm can acquire that makes them stand out. This makes it the dreams of some smaller companies to one day be on the podium of the NYSE or Nasdaq to announce your entry into the public market.
Becoming an IPO is a milestone but one that is costly and can be detrimental if done incorrectly. There are costs associated to the first entry into the public market as well as performance pressure from investors who expect more when there is a practical way of comparing two companies. Furthermore as we saw in class 6 of COMM 101, going into the public market means being fully exposed as every single move, decision and transaction must be traceable.
Not only is it a complicated and dangerous field for companies to first enter in but the difficulty doesn’t stop there, being able to stay on top of competition in the long run and maintaining a stable growth isn’t something everyone or every industry is able to do. Currently we live in a world dominated by the Internet of things and for the retail sector this means ecommerce is now the way to go. In consequence this means a retail industry which is tanking [2] and this just proves the point that even large companies who have been in the business for ages are still subject to failing in the long run on the stock market by being an IPO. Companies like Sears [3] and Toys R Us [4], as mentioned in our tutorial, have had trouble competing with online retailers, notably Amazon who has been dominating the industry in recent times.
It’s safe to say that becoming a player on the public market is a decision that has to be carefully planned out not only in the early days but, as we’ve seen countless times, in the long run as well. I believe mall’s and physical retail stores are no longer a good investment this day and age, and that is why so many investors are now more than ever looking into the future of retail which is now online. Who knows which industry the Internet of things will heavily disrupt but the stock market might be a good place to look for that answer. This isn’t to say every one in the retail industry, or any disrupted industry is destined to fail at a point on the market, as can be seen by Wal-Mart is still seeing steady growth on the NYSE.
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Sources:
The Dangers of IPOs – Jarrod Chang’s Blog. (n.d.). Retrieved October 29, 2017, from https://blogs.ubc.ca/jarrodchang/2017/10/15/the-dangers-of-ipos/
Imbert, F. (2017, May 11). Stocks close lower as retail tanks; Macy’s plunges 17%. Retrieved October 29, 2017, from https://www.cnbc.com/2017/05/11/us-markets.html
Canada, S. (n.d.). Sears Canada files for bankruptcy. Retrieved October 29, 2017, from http://money.cnn.com/2017/06/22/news/companies/sears-canada-bankruptcy/index.html
Press, T. A. (2017, September 19). Toys ‘R’ Us files for bankruptcy protection in Canada, U.S. Retrieved October 29, 2017, from http://www.cbc.ca/news/business/toys-r-us-bankruptcy-protection-1.4296274