Join Jim Stice for an in-depth discussion in this video Microsoft IPO and the valuation process, part of Finance Foundations: Business Valuation.
- All right, who's the smartest person in the world?…- You're lookin' at him.…- Ah ha, very funny. Next guess?…- Well, I don't know if he's the smartest,…but I've always thought that Bill Gates is pretty smart.…- Agreed.…So let's talk about the valuation process…that Bill Gates used when his company,…Microsoft, went public back in 1986.…- Microsoft started business in 1975.…The company was originally structured as…a partnership between the two founders,…Bill Gates, with 64%, and Paul Allen, with 36%.…The company was then structured as a corporation in 1981.…
- As of early 1986, five of Microsoft's competitors…had recently gone public.…These companies had price earnings multiples…ranging from a low of 10 to a high of 21,…with an average of 15.…- Bill Gates, who held the titles of…Chief Executive Officer and Chairman of the Board,…had been approached by several investment…banking firms, urging him to take his company public.…- Mr. Gates was drawing a salary of…just $133,000 per year from the company.…The investment bankers pointed out that if…
Make sure to check out the Stice brothers' other accounting and finance courses to understand the other economic factors that impact your business.
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- Using market, cost, and income approaches to business valuation
- Valuing homes
- Valuing companies by multiples
- Using price-to-sales ratios to value companies
- Using discounted cash-flow analysis to estimate value
- Valuing McDonald's as a case study