Going Public

Sounds good, right? Lots of capital and no additional debt. But as you might expect, there is no free lunch. First, each share of stock that is sold represents a share of the profits of the company that is being sold. Second, in order to become a publicly-traded company it is necessary to meet many regulatory requirements and entails filing periodic public reports detailing the company’s financial information. And technically, it means that the public now owns the company. Nonetheless, many entrepreneurs feel that going public is the ultimate symbol of success.  

You’ve heard of Starbucks Coffee. This company was originally started by some college professors in Seattle who thought Americans deserved to drink better coffee than the watered-down machine-type coffee we were accustomed to drinking. So they arranged to have exotic coffee beans imported from other parts of the world and opened a little store at the farmer’s market where they sold roasted coffee beans. Ten years later, a man named Howard Schultz joined the company as a marketing executive. He believed the real future of the company was in actually serving specialty-brewed coffee drinks, and convinced the owners to open the first coffee bar in 1985.

Once Howard saw that the coffee bar concept worked, he decided to aim higher. He put together a group of private investors, bought Starbucks, and began to expand. During his first year at the helm of the company, Howard opened 17 Starbucks Cafés. By 1992, there were 165 cafés around the country and he was ready to go public. Starbucks (www.starbucks.com) was listed on the NASDAQ stock exchange under the symbol SBUX. Many of the people who bought shares in the initial public offering (IPO) were people who had frequented Starbucks cafés in Seattle. Over the last 12 years an initial investment in Starbucks has generated a return of 600% for stockholders. Today the company has over 8,000 cafés in over 30 countries, and the company is still expanding.  Every eight hours a new Starbucks café opens somewhere in the world.