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Or in other words how is IPO value determined?

Flux
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    "... Berkshare Hathaway had an IPO starting at $7000+" Citation needed. – Flux Nov 01 '20 at 19:25
  • Berkshire Hathaway stock crossed the $7000 mark in 1989. It was already a public company long before that. – Flux Nov 02 '20 at 01:17
  • Downvoting it because this basically asks for validation of a claim ((Berkshire Heatharway IPO at 7000) that either shows ZERO reality by the OP or ZERO effort to actually do ANY research. The IPO of Berkshire was... not by buffet at all. In fact, buffet took over an existing and public textile business (named Berkshire Heathaway). The story is quite funny - https://www.fool.com/investing/2019/11/24/if-you-invested-1000-in-berkshires-ipo-this-is-how.aspx - they where a struggling textile business and founded in 1839. Someone wanted to buy out Buffet and he considered the price ... read it ;) – TomTom Nov 02 '20 at 15:59
  • @TomTom The title of that story ("If You Invested $1,000 in Berkshire's IPO, This Is How Much Money You'd Have Now") is wrong. Berkshire Hathaway did not have its IPO in 1964. – Flux Nov 03 '20 at 10:28

2 Answers2

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Berkshire Hathaway was already a public company before Warren Buffet bought a single share

The owner before Buffet actually offered to buy him out at $11.50 but tried to stiff him. The company was founded in 1839, so I'd be surprised if anyone who bought in "at the beginning" was even alive when Buffet invested in it.

sevensevens
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The starting point is valuing the company's assets and business. When the preliminary prospectus is completed, they go on a road show to generate institutional interest. Then they price the IPO based on the demand. Note that IPO valuation is not the same as company valuation.

Before the public issuance of the stock, an investment bank is hired to determine the value of the company and its shares before they are listed on an exchange.

A roadshow is a series of presentations made in various locations leading up to an initial public offering (IPO). The roadshow is a sales pitch or promotion made by the underwriting firm and a company's management team to potential investors before going public... The goal of the roadshow is to generate enthusiasm surrounding the company's upcoming IPO, which means the success of the IPO depends on a successful roadshow.

Bob Baerker
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