Wall Street players and going public

This lesson explains the main Wall Street players and the initial public offering (IPO) process, using Netflix’s 2002 IPO of 5.5 million shares at $15 as an example. The explanation is based on Business Acumen for Strategic Communicators: A Primer, Ch. 7–9.

What “Wall Street” Means

According to Business Acumen for Strategic Communicators: A Primer, Ch. 7–9, the stock market and the financial community are often called “Wall Street” or “the street.” In practice, this term refers to the network of companies, markets, investors, analysts, regulators, and communicators involved in buying, selling, and evaluating securities such as stocks.

Key Wall Street Players

Several important groups help a company move from being privately held to publicly traded.

• The company going public: This is the business selling shares to the public. In this lesson’s example, that company is Netflix.
• Stock exchanges: Public shares trade on organized markets. Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 highlights the New York Stock Exchange (NYSE) and NASDAQ. NASDAQ is described as an all-electronic exchange that has traditionally attracted technology companies.
• Investors: These are the people and institutions that buy shares. Once a company is public, investors help determine the stock’s market value through trading.
• Financial analysts and the financial community: These groups evaluate companies, ask questions about revenue, expenses, and business performance, and influence market perception.
• Regulators: The U.S. Securities and Exchange Commission (SEC) oversees securities markets and disclosure rules. Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 emphasizes that timely, accurate, and truthful information is essential to fair markets.
• Accounting standard setters: The Financial Accounting Standards Board (FASB), with SEC authority, develops U.S. financial reporting standards known as GAAP. These standards improve consistency and transparency in financial reports.
• Communicators and investor relations professionals: These professionals help explain the company’s story, performance, and disclosures to the market while following securities laws and Regulation Fair Disclosure (Reg FD).

Why Companies Go Public

A company goes public to sell shares to outside investors in the public market. This can give the company access to capital and place its stock on an exchange where the shares can be traded. Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 also notes that an IPO is the long-established method for going public, although direct listings have emerged as an alternative.

The IPO Process

An IPO, or initial public offering, is the first sale of a company’s shares to the public. Using the source material, the process can be summarized in clear stages:

1. Preparation: The company gets ready to become public by organizing its financial reporting and disclosures.
2. Regulatory disclosure: Because public markets depend on accurate and truthful information, the company must provide investors with important financial and business information under SEC rules.
3. Marketing the offering: In a traditional IPO, the company goes on a road show to present itself to potential investors. Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 contrasts this with a direct listing, where there is no road show and no new capital raised.
4. Pricing the shares: A price is set for the shares that will be sold in the IPO.
5. Public trading begins: After the offering, the shares begin trading on a stock exchange such as NASDAQ or the NYSE.

Netflix’s 2002 IPO Example

Netflix provides a useful real-world example of a company entering the public market. In 2002, Netflix went public by offering 5.5 million shares at $15 per share.

This example shows the basic mechanics of an IPO:

• Number of shares sold: 5.5 million
• Price per share: $15
• Public market entry: Netflix moved from being a private company to a publicly traded one

To estimate the size of the offering, multiply the number of shares by the price per share:

5.5 million shares × $15 = $82.5 million

So, Netflix’s IPO raised about $82.5 million before considering offering costs and related expenses.

What Happens After a Company Goes Public

After an IPO, a company takes on new responsibilities. As described in Business Acumen for Strategic Communicators: A Primer, Ch. 7–9, public companies must continue providing the market with timely, accurate, and truthful information. They report financial results using GAAP standards, and if they use non-GAAP measures such as EBIT or EBITDA, they must reconcile them to the regular GAAP figures.

Public companies must also follow Regulation Fair Disclosure, or Reg FD. This rule supports a balanced playing field by helping ensure that important information is not selectively shared with only a few investors. The source uses Netflix again as an example, noting that the SEC later clarified that companies may use social media for disclosure if investors have been properly informed that those channels may be used.

Why These Players Matter in the Netflix Example

• Netflix was the issuer, or the company selling shares.
• The exchange provided the public marketplace where Netflix shares could trade.
• Investors bought the 5.5 million shares offered at $15 each.
• The SEC provided the regulatory framework for disclosures and fair trading.
• FASB and GAAP rules helped shape how Netflix would report financial performance as a public company.
• Communicators and investor relations teams helped explain the business to the market and support compliance with disclosure rules.

Lesson Summary

In Business Acumen for Strategic Communicators: A Primer, Ch. 7–9, Wall Street refers to the broader financial community surrounding the stock market. The key players include the company going public, stock exchanges like NASDAQ and the NYSE, investors, analysts, regulators such as the SEC, accounting standard setters like FASB, and communicators who help manage disclosures. In a traditional IPO, a company prepares disclosures, markets the offering, prices its shares, and begins public trading. Netflix’s 2002 IPO illustrates this process clearly: it sold 5.5 million shares at $15 each, raising about $82.5 million and becoming a public company subject to ongoing reporting and disclosure responsibilities.