Initial Public Offering Paper Essay

The focus of this paper is to dig into and research the financing relinquishs that an administration mustinessinessiness face when going existence. The team up has selected Chipotle Mexican Grill, Inc. as the physical composition which has had an initial world contri aloneeing in the last 3 years. The learning team give spoken communication adaption, disclosure, and compliance issues and salute of issuance. In addition, the team lead examine the impact on ownership control and return as well as the writer and finish of funds.Financing Issues that an Organization Faces When Going state-supportedan initial Public religious whirl ( initial public offering), is highly expensive for organizations. It is common for a weensy business to return among $50,000 and $250,000 to complot and publicize an offering. According to Paul G. Joubert, spring of The Portable MBA in Finance and Accounting, initial public offering claims between 15 and 20 theatrical role of the proceeds of the sale of linage (IPO Forum, 2008). near a nonher(prenominal) cost associated with going public include lead netherwriters commission, expenses for legal and bill services, printing costs and filing costs with the Securities and Exchange instruction ( mo). Organizations may have ongoing expenses for legal, accounting and filing services (IPO Forum, 2008).Issues meeting Dividend Policies and Constraints on Dividend PaymentsA firm must examine each financing and investment issues before find the proper establishout of dividends for their organization. Some organizations opt to pay out smaller cash dividends to bear earnings for future expansion. It is ideal for an organization to start with smaller payouts, and report with unprogressive dividends per sh be. This payout decision is a issue of the organizations capital budgeting decision.Another alternative for payout of dividends is to finance a large portion of their capital expenditures. This will free up cash that the organization can pay out to sh arholders. This payout decision is a result of the decision to borrow for the organizations growth (Brealey, Myers, and Marcus, 2007).ChipotleChipotle Mexican Grill, INC. is a fast-casual restaurant. It offers customers the forest diet they would receive in a restaurant with fast-food style quickness. The first opening move was in 1993 by the founderand chief executive officer Steve Ells. They serve very few things save claim to provide thousands of options. Their base choices are burritos, burrito bowls, tacos, and salads. Chipotles culture is diet With nonpareilness which involves using unprocessed, seasonal, family-farmed,.naturally made, added hormone free, organic, and artisanal, in the course of Chipotle.com. Chipotle claims there products to better, all the way from dairy to meat. They only purchase from farms in which the animals are treated humanely and naturally raised. This philosophy has allowed Chipotle to grow fro m one location in 1993 to 670 in 2007 as well as compete in the fastest ontogeny industry in restaurants (Chipotle, 2008).Registration, Disclosure and residence IssuesChipotle filed a form S-1/A with the unify States Securities and Exchange Commission on declination 23, 2003. Two securities were registered under the filing as follows Class A common ancestry, equation value $0.01 per share, offered by the registrant and Class A common stock, par value $0.01 per share, offered by the exchange shareholder.( Form S-1/A ,2005) ordinary stock offered by the registrant is at a Proposed Maximum Aggregate Offering value of $1 million dollars and a allowance fee of $11,770. The Proposed Maximum Aggregate Offering Price of the common stock offered by the cuckolding shareholder is $49.5 million (over parceling selling to the underwriters, if any, factored in to chalk up) with a registration fee of $5,296.50. A total of 78,78,788 shares is include in the IPO and broken knock off b y 60,60,606 from Chipotle Mexican Grill, INC and 18,18,182 from McDonalds Ventures, LLC as the selling shareholder. Chipotle intends to list their common stock on the smart York Stock Exchange under the symbol CMG and selling charge is between $15.50 and $17.50 per share. (Form S-1/A ,2005)Disclosure is the release of relevant information. (Disclosure ,2008) In Chipotles sulfur filing they unwrap the prospectus statement, financial data, and future intentions. finished there prospectus statement Chipotle makes it drop that they are set apart from other chains by serving Food with Integrity.However, there are risks conf apply in investing, they are as follows the make love in of new injects rapidly creation established, leave out of independent operating history, ability to continue to grow and profit, andhealth and safety concerns regarding the ingredients used among others. Although the risk factors are in place, Chipotles financial data provides more government agenc y of returned profit on investment. In their speedily Improving Financial Performance partition of the SEC filing they state a 130% increase in receipts in 2004 of 470.7 million up from 2002 and 49% up from 2003.And, average gross revenue in new restaurants after 90 occupation daylights increase 24.9% a total of $303,390. From 2002-2004 Chipotle open a total of 237 stores. Their increased financial growth is attributed to word-of-mouth gross sales and quicker implementation of Chipotle culture in the area of the new restaurant. Also, more quite a little are aware of Chipotle, thus change magnitude average opening sales.( Form S-1/A ,2005)The future plans of Chipotle is to expand operations and sales by opening new stores. They prefigure opening a total of 75 stores in 2005 of which 58 were already opened at the time of the SEC filing. In order to expand sales they plan to implement an online method of ordering and change magnitude fax lines to accommodate heavier traffic without do service to suffer. And, create new food options with existing ingredients. Through filing the SEC Chipotle is in compliance with the securities act of 1933 through and through rule 457 by following registration fee rules. ( complaisance, 2008)Cost of IssuanceA company filing an IPO must select underwriters in order to issue their stock. The underwriters purchase the stock and sell it at a slightly higher price than what they bought it for. They are responsible for all shares allotted, not including over allotment, and are not reimbursed for shares not sold at initial offer price. Chipotles underwriters areMorgan Stanley & Co. In mergeddSG Cowen & Co., LLCBanc of America Securities LLCCitigroup Global Markets Inc.J.P. Morgan Securities Inc.Merrill Lynch, Pierce, Fenner & SmithIncorporatedA.G. Edwards & Sons, Inc. red blood cell Capital Markets CorporationSunTrust Capital Markets, Inc.Wachovia Capital Markets, LLC(Form S-1/A ,2005)Chipotle Mexican Grill, INC. did not discl ose the cost of issuance in the SEC filing.Impact on Ownership Control and ReturnChipotle had filed their IPO October 25th, 2005. Seeking $121.4 Million, Morgan Stanley and SG Cowen & Co., LLC they auctioned their shares. Clarifying some of the expound behind its highly anticipated stock offering, Chipotle estimated its market value to be as high as $121. 4 Million, Chipotle will remain majority owned by McDonalds Corp. (Chipotle.com, 2008).On its first day as a public company, Chipotle stock rose exactly 100%, shutdown at $44.00 per share. On September 8, 2006 McDonalds Corp. announced it had started an offer for its shareholders to exchange McDonalds stock for shares of Chipotle Mexican Grill. The exchange allowed McDonalds shareholders to acquire Chipotle shares at a 10 percent discount. The offer is capped at a level of 0.9157 Chipotle shares for each McDonalds share exchanged owned by McDonalds Corporation. On October 13, 2006, McDonalds Corp. completed a tax-free swap of clas s B common stock in Chipotle Mexican Grill, Inc. (NYSECMG), for its own common stock. McDonalds Corp. has right off fully divested its investment in Chipotle. book of facts and Application of FundsWhen it comes to an IPO, the initial funds come from an investment banking firm referred to as an underwriter. The underwriter provides the financial advice to the company, buys the stock from the company, and then resells it to the public. Depending on the size of the IPO and number of stocks being offered, the company may have one underwriter or multiple underwriters. in front the stocks can be sold, they must be registered with the U.S. Securities and Exchange Commission (SEC). The primary winding responsibilities of the SEC are to enforce federal securities laws and to modulate stocks and the stock market. The company must overly decide whether to trade the stocks on all the New York Stock Exchange or NASDAQ. This would be the secondary and future source of funds.When Chipotle de cided to go public, they had two underwriting companies as their primary underwriters Morgan Stanley and SG Cowen & Co. LLC. Chipotle originally planned to sell 6.3 million shares at $15.50 to $17.50 per share but ended up changing at the last minute to 6.3 million shares at $22 per share. In the end the offering raised approximately $133M in primary capitalto fund new store growth.In conclusion, organizations must take into consideration many financial issues and decisions when going public. Many of these financial issues will be ongoing, and have to be taken into consideration when determining dividend payout to shareholders.Reference(s)Brealey, R., Myers, S., and Marcus, A. (2007). Fundamentals of corporate finance. (5th ed.). University of Phoenix Custom Edition e-text New York, NY McGraw-Hill/Irwin. Retrieved February 9, 2008 from University of Phoenix, rEsource, FIN325-Financial Analysis for Managers II Web site.Chipotle (2008) Chipotle.com Investor Relations. Retrieved on Fe bruary 10, 2007 from,http//phx.corporate-ir.net/phoenix.zhtml?c=194775&p=irol-homeProfile&t=&id=&Compliance (2008) Compliance Definitions. Retrieved on February 10, 2008 from, http//www.investorwords.com/5468/compliance.htmlDisclosure (2008) Disclosure definition. Retrieved on February 11, 2008 from,http//www.investorwords.com/1469/disclosure.htmlForm S-1/A (2005) Chipotle Mexican Grill. INC SEC Filing. Retrieved on February 10,2007 from, http//phx.corporate-ir.net/phoenix.zhtml?c=194775&p=irol-sec&secCat01.1_rs=241&secCat01.1_rc=10Initial Public Offering Forum. (n.d.). Initial public offering. Retrieved February 11, 2008 from http//www.referenceforbusiness.com/small/Inc-Mail/Initial-Public-Offerings.html