The company's operations and development require capital, especially when the company is growing or expanding to international markets, as Santa Claus' business has been genuinely since its beginning.
The company's operations can be funded by internal funding, i.e. through the company's operations or by external financing, for example by raising share capital or debt. In the case of Santa Claus, internal funding would be problematic as the result of Mr. Santa’s operations is known to be anything but money and rather immense joy .
One of the most important preconditions for success in receiving financing is to have an excellent team and an attractive business idea. Santa’s all good with these preconditions as he has Santa’s village in Korvatunturi full of hard-working, innovative and happy Christmas elves. We all are familiar with Santa’s wonderful business idea which does thus not need any further introductions.
The company also needs to know its baseline, such as its market position and financial situation, being the return and cost structure. In the case of Santa, the market position is unambiguously monopolistic, but the cost structure is challenging because only the resources the yield are numerically unmanageable. When the base is okay, a company may start to reach for the stars, in the case of Santa to the night sky of December. Before the growth effort, it is still necessary to ensure that the business legal matters are in order. It is worthwhile to go through the shareholders’ agreement, intellectual property rights and employment contracts. We will come back to Korvatunturi's intellectual property and shareholders’ agreement later.
What about IPO? Would an initial public offering be a possible form of financing for his business? Listing is usually carried out by arranging a share issue or seasoned equity offering to extend the company's ownership base and obtain additional funding. In addition to responding to the financial needs of the listed company, the aim of listing is often to increase the liquidity of the company's shares and thereby to increase the shareholders’ holdings. In the case of Santa, the IPO is unlikely to be possible, as the shareholding is, as far as we know, mainly in the hands of Santa and Mrs. Claus(e). How does Santa then fund his business? It may stay as a part of Christmas magic and remain an unresolved question, or who knows?
Merry Christamas from Fondia's Finance & M&A team!