Why Do Companies IPO?

[00:00:00]Can you explain what is an IPO?

[00:00:01]>> Yeah, yeah, I will. You know, this is a good simple question. Let's just Let's get it out of the way. So, you know, you start a lemonade stand, okay? And any any company you want, you start a company. It's private. It's just a company that you made and you own 100% of it. Now, let's say you want to bring in another friend, okay? You own 100% of your of your lemonade stand. You want to bring in a friend, like let's say Aiden Calvin.

[00:00:22]>> [laughter] >> Okay? You want to give him a share. So, you you um However you decide to split it up, that's just the way stock is, okay? So, if I give him half, then we we use stock to represent it. So, maybe there's only two shares of the company.

[00:00:35]I have one, he has one. 50% 50%. Let's say I want to bring another friend, okay? So, we issue a third share. We have one each. We each have 33%. Stock is just a a way of of signifying ownership of the company. You can issue as many shares as you like. Could be a million shares and you split it out, so you get 280,000, you get whatever.

[00:00:51]You're just trying to find a way of showing the ownership of the company.

[00:00:53]But, it's all private. It's just people between you and friends and people that you're investing with, okay? When you want to list it publicly, which means allowing anybody to buy and sell these shares, that's when you do an IPO, initial public offering, okay? That means it's no longer just you and people behind the scenes. It's open to be traded on public exchanges. Anyone can go and buy some shares of your company or they can sell some or whatever.

[00:01:17]That's the idea. That's the initial public offering. So, for the longest time, companies would IPO when they needed money for growth. You'd be a a new company, like like Google or Facebook and you're kind of just getting off the ground and you would IPO, you would issue shares to the public, they would buy them, you would get an infusion of cash, they would get some ownership, and they could trade and sell those shares, and you would grow from there. Recently, the companies have been doing all their growth privately. So, instead of like if this is if this is your company and it's been growing, usually you would you would IPO here and everyone could buy your shares low and grow with you. But, now you've been IPOing here, kind of like after you've gotten all the growth and you're at the massive valuation. That's when you're dumping it on the public.

[00:01:58]Okay? And the big question is why here?

[00:02:01]Why not here? And people are saying it's not cuz they need the money, it's cuz they want they see the they see this happening.

[00:02:09]>> [laughter] >> They see that like this is the right time. This is the mania. This is when you want to get out. And so, that's that's I mean, you know, I threw a lot at you there, but basically an IPO is just is listing your company publicly so people can finally buy it. Have there been any good IPOs recently? There was that the Nvidia competitor Cambrior They're all down, I think. I don't know if there's any been big successful IPOs this year. Yeah, Cerebrus Cerebrus Cerebrus? [music] I don't know how to say their name. Ligma's down. Yeah, all the big recent ones are down, I think. I don't know if anyone's had a big pop.

[00:02:40]What is Ligma?

[00:02:43]Yeah, Ligma had a big one. The Ligma IPO was crazy. A lot of people were subscribed. Your mother was subscribed.

[00:02:48]>> [laughter] >> How's FaZe Clan's stock going? It got delisted, bro. Is there anything you should find out about new IPOs? In the modern time, there's not as many IPOs as there used to be. They're all really, really big. So, it's hard to miss. I There's not many IPOs that I would be missing. They're they're massive lately.

[00:03:04]But, you can find it easily. You can just Google it. How do I sell my delisted stock? You You can't, bro.

[00:03:10]>> [laughter] >> I mean, you could You have to find a buyer, I guess. You have to find a human being wants to give you money for your delisted stock. You can't sell it if there's no More likely, the company is no longer existing. You're done. Is this Bed Bath & Beyond or something?

[00:03:23]Do you ever exercise your voting rights?

[00:03:25]Uh I've voted. Not just in real life.

[00:03:28]I've voted on a couple stocks I own.

[00:03:30]Doesn't matter. It's not about When I talk about voting rights like regards to the China or whatever, it's that you have a legal ownership. It's not that I I I never I don't have enough shares to make a difference in any company that I own. My vote doesn't matter. But, it's more of like there's like legal rights and protections that give me some ability not to get [ __ ] over by dumb decisions by the corporate management.

[00:03:50]And you don't have that uh you don't have that in the Chinese stocks. He writes in Trump out of principle.

[00:03:56]>> [laughter] >> Yeah. When I'm when I'm voting for Google stock, I vote for Trump out of principle. I just say like, "What would Donnie T do?" How do you feel about the Nvidia IPO? You regret selling your stock? Nvidia IPO'd in the year 2001.

[00:04:09]They replaced Enron in the stock exchange. I was 10 years old.

[00:04:12]>> [laughter] >> I got Nvidia stock in 2017 when I worked there as an employee. And I sold after it went up like I I never do with the IPO, bro. I didn't I didn't hold Nvidia for 20 years. I held it for five. Do you regret not buying the IPO?

[00:04:27]I mean, if I could go back in time to the year 2001, is there anything I would rather do other than invest in Nvidia?

[00:04:32]>> [laughter] >> If I go back to let's say mid-2001, do I have anything I would want to do other than invest in Nvidia? Uh actually, it would be a waste of a time travel because you have to wait 20 years for Nvidia. Nvidia is like flat for 20 years, bro. It only popped off with the AI trade post COVID. It was a GPU company until then, so.