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Introduction
Marc Andreessen and Jim Clark founded Netscape in 1994 under the name Mosaic Communications Corporation. The company focused on the expanding world of the internet and released the web browser Mosaic Netscape 0.9. In November of 1994 the company took on the name Netscape after trademark ownership problems. A year later, Netscape was growing impressively and was looking for new ways to raise capital to fund its growth. Among the various alternatives, the IPO was the chosen method. There was huge interest in the IPO of Netscape and the initial price of $14 per share was being reconsidered. The board's responsibility was thus to determine the appropriateness of the proposed increase in price after balancing the potential risks and rewards that might accompany the move taken.
The reasons for going public
Netscape does need to start looking for new sources to finance its capital needs. According to the following rationales:
1. The company is on the early growing stage with a lot of existing fixed costs which make it harder to adapt in case of emergency shortfall or change in business climate. The company seems to be vulnerable to market risks and thus need to look for bigger funding sources in order to minimize its exposures.
2. There are acceptable evidences that the company will potentially need high amount of capital for the next 3 to 5 years, as follows.
a. Sales strategy of ?giving out today' make the costs of marketing very high, in which it accounts for 50% of total revenue in 1995.
b. Netscape is the technological company that, in nature, requires lots of capital o ...