Please answer the following 2 DQ ‘s, and then respond to the responses with knowledgeable information. The first two are DQ that need to be answered and the following 3 are responses that need to responded to with informative information.Discussion Questions to be answered:1. An innovative technology company is planning a NASDAQ IPO. One year ahead of the planned IPO the company is already raising capital through private placement markets. What you can infer from the company success in the private market about the success of the IPO?2. The DJIA is often criticized as not being representative of the economy given that it comprises of stocks of only 30, large, mature, and less volatile companies. It has been observed that the DJIA performance often does not mimic that of the NYSE. What are the merits or demerits of the DJIA composition? Provide examples to support your answer.Respond To the following discussions with informative information:1. DQ 1 One of the trends over the past few years, when it comes to successful IPOs, is the term of private operation and the private equity or funding that builds up the business, prior to the public offering. After a stretch of failed IPOs, and hype driven by unrealistic financial projections, the market started to analyze new offerings with more substantial eyes focused on performance. A company with real revenue growth, real serviceable debt, real investors willing to risk real dollars, and in some cases, even real profits, can accomplish a much easier path to selling their story. Helm (2011) identifies a key change in the philosophy of a successful IPO. For many years, the idea was to go public before anyone thought that the company or industry in question was a fad. Now, many of these companies are taking their business to the public market after they have proven they are not a fad. This changes the risk significantly. If a company is successful in the private markets first, they will have a track record not only for those initial investors, but for the public markets as well. Not only is the IPO a chance for individual investors to buy in, but it represents a chance for the first wave of private investors to either cash out on their investment, or grow their stake in the company.An existing operation, with a record of performance, has a more broad scope to sell. If they have more than just future projections to convince an investment, and can demonstrate a current path of success with the private investors, the public offering, in many ways, sells itself. Garret (2019) argues that a successful private period of operations actually creates pent up demand for the stock, before it ever comes to market. A consumer or investor who already knows about the company, perhaps has utilized the product or service, and now learns that they might be able to buy in, will be far less concerned with risk.Garret, O. (2019). The Most Successful IPOs Have This One Thing In Common. Forbes. Published October 10th, 2019. Retrieved from: https://www.forbes.com/sites/oliviergarret/2019/10/10/the-most-successful-ipos-have-this-one-thing-in-common/#4e8019572b21Helm, B. (2011). Thinking of Going Public? Inc. Magazine. Published September 2011. Retrieved from: https://www.inc.com/magazine/201109/inc-500-raising-capital-ipo-vs-private-equity.html2. DQ 1 As per Deloitte.com Private Company IPOs in United States is all about timing. To maximize the chances of IPO success, a company should focus on factors that could be controlled. As per Deloitte poll of nearly 3000 private company executives more than one third of them view timing the market as biggest concern when considering an IPO.As per the article a poorly times IPO is difficult to overcome and to be successful these are the factors that can be controlled.1. A business model with great growth potential is important.2. A very strong and dedicated team is required for IPO journey.3. Financial planning and forecasting that would be laid out in solid business infrastructure and implementation systems is required.4. Appropriate risk management practices and smooth financial reporting close process is very much required.5. Finally an adequate time to gear up for actual IPO.Also there are number of ways to increase the chances of IPO success, some of these to be mentioned could be to analyze the market conditions, deciding when to ramp up for an IPO, typically companies start between 18 and 36 months before the anticipated IPO date, other factors that could influence are the current size of the company and the growth pace toward envisioned IPO state. As the formal process typically takes six months , in reality six months is too short considering the people involved and the process and hence preparations that are started 24 months before the IPO date is ideal for a smooth IPO process.Referenceshttps://www2.deloitte.com/us/en/pages/audit/articles/private-owned-company-initial-public-offering.htmlhttp://gcumedia.com/digital-resources/cengage/2011/investment-analysis-and-portfolio-management_ebook_10e.php 3. DQ 2 This Discussion Question has covered the limitations of the Dow Jones Industrial Average as a stock market index. During the course of my career, we generally used the S&P 500 or the Russell 1000 as the index of choice for large US companies.In summary, the stock market indexes that we often used as investment managers include:S&P 500 or Russell 1000 – Large CompaniesS&P 400 – Mid-Size CompaniesRussell 2000 – Small CompaniesWilshire 5000 – Entire US stock marketMSCI EAFE – International Developed MarketsMSCI EM – International Emerging MarketsWhich index do you think has had the best recent returns? Which has had the best long-term returns? Why?
