United Parcel Service Goes Public in an Equity IPO
On November 10, 1999, United Parcel Service (UPS) raised $5.47 billion by selling 109.4 million shares of Class B common stock at an offering price of $50 per share in the biggest IPO by any U.S. firm in history. The share price exploded to $67.38 at the end of the first day of trading. The IPO represented 9% of the firm's stock and established the firm's total market value at $81.9 billion (i.e., [$67.38 x 109.4 / .09]). With 1998 revenue of $24.8 billion, UPS transports more than 3 billion parcels and documents annually. The company provides services in more than 200 countries.
By issuing only a portion of its Class B stock to the public, UPS was interested in ensuring that control would remain in the hands of current management. The cash proceeds of the stock issue were used to buy back about 9% of the Class A voting stock held by employees and by heirs to the founding Casey family, thereby keeping the total number of shares outstanding constant. The Class B shares have one vote each, whereas the Class A shares have 10 votes. In addition, the issuance of Class B stock provides a currency for making acquisitions. UPS had attempted unsuccessfully to acquire certain firms that had indicated a strong desire for UPS shares rather than cash.
The beneficiaries of the sale include UPS employees from top management to workers on the loading docks. In a growing trend in U.S. companies to generate greater employee loyalty and productivity, UPS offered all 330,000 employees worldwide an opportunity to buy shares in this highly profitable company at prices as low as $20 per share. Before UPS, the largest IPOs included Conoco in October 1998 at $4.40 billion, Goldman Sachs in May 1999 at $3.66 billion, Charter Communications in November 1999 at $3.23 billion, and Lucent Technologies in April 1996 at $3 billion.
-Describe the motivation for UPS to undertake this type of transaction.

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The Answer of United Parcel Service Goes Public in an Equity IPO
On November 10, 1999, United Parcel Service (UPS) raised $5.47 billion by selling 109.4 million shares of Class B common stock at an offering price of $50 per share in the biggest IPO by any U.S. firm in history. The share price exploded to $67.38 at the end of the first day of trading. The IPO represented 9% of the firm's stock and established the firm's total market value at $81.9 billion (i.e., [$67.38 x 109.4 / .09]). With 1998 revenue of $24.8 billion, UPS transports more than 3 billion parcels and documents annually. The company provides services in more than 200 countries.
By issuing only a portion of its Class B stock to the public, UPS was interested in ensuring that control would remain in the hands of current management. The cash proceeds of the stock issue were used to buy back about 9% of the Class A voting stock held by employees and by heirs to the founding Casey family, thereby keeping the total number of shares outstanding constant. The Class B shares have one vote each, whereas the Class A shares have 10 votes. In addition, the issuance of Class B stock provides a currency for making acquisitions. UPS had attempted unsuccessfully to acquire certain firms that had indicated a strong desire for UPS shares rather than cash.
The beneficiaries of the sale include UPS employees from top management to workers on the loading docks. In a growing trend in U.S. companies to generate greater employee loyalty and productivity, UPS offered all 330,000 employees worldwide an opportunity to buy shares in this highly profitable company at prices as low as $20 per share. Before UPS, the largest IPOs included Conoco in October 1998 at $4.40 billion, Goldman Sachs in May 1999 at $3.66 billion, Charter Communications in November 1999 at $3.23 billion, and Lucent Technologies in April 1996 at $3 billion.
-Describe the motivation for UPS to undertake this type of transaction.