Reference no: EM132170065
PLEASE READ THE BELOW ESSAY AND WRITE A SUBSTANTIVE 300 WORD REPLY Make Sure That You Are Adding New And Relevant Information With Each This Reply
The public traded company that was chosen is Sonos. The company is a technology company and went as an initial public offering (IPO) on August 2, 2018. The company was estimated prior to the actual IPO date at $15.00 per share.
On the first date the company went IPO it closed at $19.91 per share and now is at $14.31 per share. Currently the price per share is at $13.73 and is down by -4.05%. The company has sold 13.9 million shares (IPOscoop, 2018).
As from what was witnessed on their financial information it looks as if this company would not be a good buy. The financial information on this company is that their market cap is $1475.76 million, revenues $1092.8 million from the last 12 months, and net income is -$16.3 million from the last 12 months (IPOscoop,2018). The initial estimation of the value seems to not be accurate to me due to the fact technology is on the rise.
This company sells speakers that are wireless for the home. Although, with it being a new company the valuation may be accurate due to the losses that occur during the first three to five years.
Based upon the company's asset approach the value is based upon several methods of the businesses net liabilities. The company has slipped even lower than they are now and bounced back, however, it seems that they only peak at certain times of the year.
Hitchner (2017) states, "many factors are taken into consideration in the analysis of risk, including most of the factors set forth in Revenue Ruling 59-60 (p.502)." In other words, Sonos stocks selloff mostly corresponded with the movement of the broader market, but there were also a couple of developments involved.
Sonos launched in the Japanese market full-scale on October 3, 2018. It is suggested that Sonos could soon make its smart speakers compatible with mainstreaming devices.
Although, it is possible that Sonos will come out of the low. The company has a strong brand, and its products are generally highly regarded; however, technology hardware has a lot of competition from resource-rich tech companies that are coming to market with smart-speaking offerings. It is believed that Sonos' business model is unique, and investors still want to see the company mimic aspects of other successful corporations, in which included their revenues with less variability.
Although, Sonos expects revenues to increase as any business would hope, however since the launch in Japan shortly after the end of the quarter Sonos did not see much of an increase. Given its bottom-line shortfall to their estimates, however, and with the stock still susceptible to post-IPO volatility, it's hardly surprising to see shares pulling back as of today.
Hitchner (2017) states, "unlike restricted stock studies, pre-IPO studies suffer from the weakness that the price comparison of the two stocks is noncontemporaneous.
As such, changes in pricing may relate to significant changes in company fundamentals and risk and not just marketability (p.423)." Although, there are challenging times for a lot of companies, however, the market is flooding in technology devices and hopefully Sonos will increase in the marketplace.
References
Hitchner, J. (2017). Financial valuation: Applications and models (4th ed.). Hoboken, NJ: Wiley.
ISBN 978-1-119-28660-8IPOScoop. (2018). Last 100 IPOS.
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