Becoming an investor or a business is a goal that many people would like to achieve. Many constraints hinder them from achieving these dreams. A common challenge is capital, which is necessary for establishing any business. Public companies give opportunities to people who want to invest in the company and become owners of a small part of the business. This is done by offering stocks that potential investors can buy and become company shareholders. An Initial Public Offering (IPO) is a process where private companies sell their shares to obtain public investors. This is the first step taken by public companies to determine the stock of the business. A company can decide when and the number of stocks to sell once it offers an IPO.
An IPO could be beneficial or damaging to a company, so analyzing its advantages and disadvantages would be essential before making a final decision. One benefit of an IPO is the cash flow influx due to the new investors, which will enable the company to be more flexible when making decisions without fear of debts (Ghonyan, 2017). The new stocks are also available to employees, which helps recruit new members or retain existing ones. Creating an IPO is, however, costly, time-consuming, and also takes much paperwork. Making the company public also puts pressure to give back to the investors rather than focusing on long-term financial goals (Ghonyan, 2017).
Academy Sports and Outdoors offers sporting goods and other products for outdoor activities such as camping, fishing, and hunting. The company began as a surplus supply chain store in Texas and grew to become one of the biggest sellers of cowboy boots and fishing licenses in the 1980s (Oguh, 2020). The company continued to grow rapidly and even redefined its business model. In 2011, a private equity firm in the U.S bought ASO. ASO had e-commerce channels and more than two hundred physical stores, giving it net revenue of $120 million and revenue of $4.8 Billion in 2019 (Oguh, 2020).
On October 2, 2020, ASO established an IPO when it decided to go public. Its initial plan was to sell 15.6 million shares for $15-$17 per share, bringing about $234-$256 million to the company. This IPO would be intended to pay a long-term debt that the company had in its books of about $1.4 billion. The company made $203 million by selling its shares at $13 each (Oguh, 2020). The company has grown tremendously since the IPO. The year-over-year sales increased by 17.8% YOY in 2021, which in figures was $5.69 Billion and a further $6.77 Billion in 2022, which equated to an increase of 19.1% (Academy Sports and Outdoors Long Term Debt 2020-2023 | Aso, n.d.). The successful growth in the two years can be linked to the Covid-19 pandemic, where the demand for outdoor sporting goods and home improvement products increased. This can also explain the 5.58% decline in 2023, with annual revenue of $ 6.395 billion.
The company plans on expanding and opening stores in locations. When it went public in 2020, it sold its shares at $13, and currently, the stock is trading at $66 (Aso Stock Price | Academy Sports & Outdoors Inc. Stock Quote (u. S., 2023). The return on the investment is good, and the long-term debt has declined by 14.5% YOY and is now at $0.584B (Academy Sports and Outdoors Long Term Debt 2020-2023 | Aso, n.d.).
It is only possible for some companies that conduct business around the globe to become publicly traded firms, and some of those that are sufficiently large lack an interest in becoming public. After a company has an initial public offering (IPO), the risks grow immensely higher since the owner becomes responsible for ensuring not just that the objectives are met and that your staff is happy and productive but also that investors remain enthusiastic about the business so that they can keep up the cash inflow.
References
Aso stock price | academy sports & outdoors inc. Stock quote(U. S. : Nasdaq). (2023, April 25). MarketWatch. https://www.marketwatch.com/investing/stock/aso
Academy sports and outdoors long-term debt 2020-2023 | aso. (n.d.). Retrieved April 25, 2023, from https://www.macrotrends.net/stocks/charts/ASO/academy-sports-and-outdoors/long-term-debt
Oguh, C. (2020). KKR-backed Academy Sports and Outdoors raises $203 million in IPO. Reuters.com. https://www.reuters.com/article/us-academy-sports-ipo/kkr-backedacademy-sports-and-outdoors-raises-203-million-in-ipo-source-idUSKBN26M7MO.
Ghonyan, L. (2017). Advantages and disadvantages of going public and becoming a listed company. Available at SSRN 2995271.
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