Over the past few years, many media firms that are highly popular in their field have sold shares to their investors through prestigious Initial Public Offerings, shortly called as an IPO. During this process, many insiders belonging to these companies inclusive of executives, venture capitalists and even their previous staff were able to earn huge sums of money. On the other hand, it was not that much lucrative for ordinary shareholders. As they went public and they followed the insider cash out strategies, the value of shares of the most prominent social media techs has fallen and they are now facing the problem of lawsuits from their shareholders.
The deviating luck of insiders of the company, who made huge money as against ordinary shareholders, who have earned nothing at all, raised questions about the purpose behind these social media techs to opt for an IPO. It is said that this move was intentionally made by the companies for the benefit of insiders at the cost of the general investors. On the other hand, the previous employees and venture capitalists, who enjoyed huge money actually took huge risks and so the money earned is rewarding for them.
The IPO process is also designed with a view to earn money from the public for funding the operations pertaining to the business and when considering this purpose, it was solved. The three most popular social media sites that caught in the issue were Facebook, Groupon and Zynga.
From an outsider’s point of view, they will feel that this insider technique and IPO process was used by these companies just with a view to blow up their valuations. They went for cashing out early, thereby making the ordinary shareholders to fall out, which brought about the shocking decline in the stock prices of these sites. Even the insiders suffered loss in the form of papers along with normal shareholders. But, there is no one to feel sorry about them due to the billions of cash out enjoyed. When this issue is viewed in a broader sense, it can be found that the crucial function of the capital markets of the United States is facing a crisis of confidence.
In addition to this latest news in the world of business and shares, other latest news can also be obtained by businessmen from websites specially meant for offering updated news in the arena of world business. Businessmen can keep themselves updated with the help of these portals.