Page 26 - Initial Public Offering - An Introduction to IPO on Wall Street

An IPO valuation is the mechanism by which an expert establishes the fair value of the stock
of a company. Due to market conditions and an IPO’s timing, two similar businesses can have
very distinct IPO valuations.
Typically an enterprise can only perform an IPO when they conclude that there is strong
demand for their products. Many tech companies had huge IPO valuations at the height of their
boom in 2000.
They earned significantly higher valuations in comparison to the businesses that later went
public, and as such, they were the beneficiaries of much higher venture capital. This was
primarily due to the fact that, in the earlier part of the 2000s, tech stocks were rising and had
an extremely high demand; the higher valuation was not simply a result of these companies'
dominance.

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