Trulia, Inc.: Post-Jobs-Act IPO

Abstract

When rival Zillow Group, Inc., went public in July 2011, it was only a matter of time before Trulia, Inc. (Trulia), followed suit. In late 2011, Trulia's board of directors was intent on going public when it hired Sean Aggarwal as its CFO to see the firm through the initial public offering (IPO) process. In late May 2012, he is considering when to go public, in the wake of Facebook's disappointing IPO earlier in the month, which had stalled the IPO market. Also, in April 2012, the Jumpstart Our Business Startups (JOBS) Act was passed into law, bringing new regulations that affected the IPO process for emerging growth companies (EGC), or companies with less than $1 billion in revenue in their most recent fiscal year. Trulia would qualify as an EGC, and therefore was eligible to avail itself of the reduced disclosure and public on-ramp provisions of the law. This case examines an IPO that follows in close proximity to the passage of the JOBS Act. Aggarwal must determine what provisions of the new law to adopt with few precedents to go by. The case includes a simple valuation exercise of Trulia's preliminary price range for instructors who wish to cover this topic. It also covers two other controversial issues about IPOs: the high costs of going public and the disappearance of small IPOs in the United States from 2001 to 2011, as motivation for the JOBS Act. A brief review is given of each topic and the controversy surrounding it to allow instructors flexibility in exposing students to these issues. This case was written for Darden's second-year MBA elective focusing on financing arrangements, but would be useful in undergraduate or graduate courses covering investment banking, capital raising, or corporate finance.

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Keywords: IPO, underpricing, JOBS Act, capital raising, financing