Assignment 4 Example | Topics and Well Written Essays - 1750 words

4 - Assignment Example Deltek Systems Inc. decided to go public in 1997 by offering its shares in the market. Every organization has to ensure that it makes the final decision of going ahead with initial public offerings (IPO) after evaluating all vital factors properly. In case of Deltek, the company decided to offer its shares to the general public for numerous reasons. The foremost factor that led the company’s management to go public was to avail the opportunity of accumulating funds for the purpose of expansion. One of the expansion strategies is to allow the organization to go public so that shares can be bought by the shareholders and, accordingly, the amount can be used for expansion. This trend was common during that time period as the software companies that were incurring losses were going public to utilize the chance of earning a good amount of revenue. According to the case, Deltek decided to go public because it allowed the probability of acquiring additional funds for financing its gr owth along with enhanced visibility. When a company is listed in the stock market, its awareness is increased and it has an advantage of enhancing its prestige among its valuable customers. Gaining awareness amongst mass consumers is another positive point of allowing the organization to be listed on the stock exchange. The central driving force that led to the decision of going public was that the employees of the company should be given the opportunity of reaping benefits for having the stock options. Since the company was a private venture, there was no market for selling the company’s stocks. Considering the scenario of the company, it wanted to offer its employees a platform to utilize the avenue of earning additional income. Since the technological firms were able to make further revenue from the stock market as a result of inflationary prices, it was a logical decision to exploit this proposal for improving the company’s performance and financial viability of th e employees. Human resources are an important asset for the organization and their financial stability in the firm should be one of the utmost concerns for the management to ensure productive services by the employees. Question 2 What advantages did Deltek find in going public once it became a public company? What disadvantages did it face? Answer 2 When Deltek Systems Inc. became a public company in 1997, it was proficient in earning an excessive amount of profit because its stock prices were growing at an accelerating pace. The biggest advantage to the company for going public was the ability of making use of its strong position in the technology market along with the stock market. It had a robust performance initially but, like all other companies, it had to face various turbulences as the stock market has the feature of intense fluctuations throughout the year. In late February 1997, the company sold about 2.9 million shares on the stock market for $11 each. During the following summer, the sales of the company grew at an exponential rate that was evident from its reported strong earnings in the stock market. By August, the earnings doubled, and this trend continued until the next year. However, afterwards, the company saw huge variations in the stock price of its shares as it oscillated in between $15 per share to $24.50 per share. This fluctuating behavior of the