Hyatt Corporation is a global company widely known for its brand of hotels, resorts, residential, and vocation ownership properties. Established by Jay Pritzker in 1957, Hyatt's worldwide portfolio consists of 453 Hyatt-branded properties scattered in the North America, Europe, Middle East, Africa, Latin America, Asia Pacific and Southwest Asia. Hyatt manages franchises and develops residential and brand hotels, and the company full service hotels is operated under five brands which are Hyatt, Park Hyatt, Hyatt Regency, Andaz, and Grand Hyatt.(Corporate Information 2011). Since the beginning of the year 2000, Hyatt has been performing excellently, and the company cash flow has doubled during the period. However, in 2009, Hyatt's revenue fell by 19% and the company's cash flow fell by 50%, which made the company to post the loss of approximately $36 millions in the first quarter of 2009. In addition, the company's consolidated revenues decreased compared to the 2008 fiscal year. The problem that faced Hyatt in 2009 was due to the current global financial crisis that affected major corporations in advanced countries. With the financial problems facing Hyatt in 2009 that served as threat to the company growth, Hyatt Corporation made the decision to go public by initiating the Initial Public Offering (IPO).
The objective of this essay is to investigate Hyatt strategy behind its recent IPO decision.
Hyatt strategy behind its recent IPO decision
"An Initial Public Offering (IPO) is a legal process in which a company registers its securities with the Securities and Exchange Commission (SEC) for sale to the general investing public." (Evans, 2011 P. 2). Many Companies view the process of going public as the route to the financial rewards and success. Following the financial difficulties that Hyatt faced in 2009, the company made the decision to go public by initiating the IPO. There are several strategies behind Hyatt's IPO decision.
First, Hyatt decision to go public is a broader access to raise capital. In the United States, going public is a single biggest source of capital for the corporate organizations. Following the Hyatt revenue decline in 2009, Hyatt Corporation makes a strategic decision to initiate the IPO to raise capital from the public. Typically, the equity capital markets are the cheap sources of funds for organizations, and equity markets are cheaper to raise funds than the bank loans. Realizing the advantages of raising funds from the equity markets, Hyatt Corporation decided to initiate the IPO in 2009. (Evans, 2011 P. 2). Having made the decision to initiate the IPO, Hyatt Corporation filed the company's registration statement (S-1) with the Securities and Exchange Commission (SEC) in 2009 in accordance with the Securities Act of 1933 and 1934. (Hyatt Annual Report 2010).
Hyatt Registration Statement (S-1)
Following the decision to go public, Hyatt Corporation registered with the SEC on November 4, 2009. A registration statement was filed on Form S-1 ( File No 333-161068), which is relating to the company initial public offering of an aggregate of 43,700,000 Class A common stock. The Class A common stock of 5,700,000 shares and 43,700,000 were registered under the registration statement. Subject to the underwriter exercise, the initial public offering price was $25.00 per share. While the aggregate offering price for the share registered and the shares sold to the public was $950 millions, the aggregate offering price for the shares registered was $142 millions. After the initial public offering closed on November 10, 2009, Hyatt received net proceed of $127 millions after deduction all the expenses including underwriting discount of $7 millions and other expenses that worth 8 millions. Moreover, the company's selling stockholders received net proceed of $901 millions after deducting the underwriting discount worth $49 millions. Goldman, Sachs & Co, Deutsche Bank Securities Inc., and J.P Morgan Securities Inc. acted as the joint lead managers. Pending the full application, Hyatt has invested the unused proceed in the short-term interest bearing securities, however, S-1 filing was successful on November 4, 2009 with the SEC pursuant to Rule 424(b).
IPO Value Journey book
Book value is one of the most important factors that investors consider before investing in a company. A book value is defined as the ratio of shareholders funds plus the number of the outstanding shares. In another words, the books value is the net-worth of shares after tax. Book value could also be calculated as follows: