In this article, I'm gonna share basics about Initial Public offer (IPO).
Let us start with the Introduction.
What is IPO?
First question First, What is IPO??
Every Company needs money to grow and expand. They do this by borrowing or by issuing shares. An IPO is short for an initial public offering. It is when a company initially offers shares of Stocks to the public. It's also called "going public."
In other words, IPO is a process by which a privately held company becomes a publicly traded company by offering its shares to the public for the first time. Main Reason of IPO “through the IPO, the company gets its name listed on the stock exchange.”
After an IPO, the issuing company becomes a publicly listed company on a recognized stock exchange.
What is the Pros and Cons of an IPO?
Second question, If we bring IPO, then what will pros and cons be?
Small companies looking for growth often use an initial public offering to raise capital. But going public brings both advantages and disadvantages.
Pros of IPO:
A successful IPO can raise huge amounts of capital. The biggest benefit of an IPO is the capital raised. It can fund research and development, or pay expenses and debt.
Stock shares are useful for mergers and acquisitions. If the company wants to acquire another business, it can offer shares as a form of payment.
For traders, a float can be a great way of buying a share of a company – or taking a position on its price trajectory – the moment it hits the stock market. IPOs also increase liquidity on the market, which makes it easier for buyers and sellers to fill their orders. IPOs can also provide company founders with an exit strategy, letting them cash in on their hard work and success.
Cons of IPO:
When a company is listed on a stock exchange, it becomes subject to the rules and regulations of a governing body. The costs of complying with SEC rules and regulations are high and getting higher. This means that it is required to disclose financial information – including accounting, tax, and profits – all of which can be useful to competitors. Investors that want to see rising profits often scrutinize management’s actions. The IPO process requires a lot of work.
Business owners could lose ownership control of the business because the Board of Directors has the power to fire them.
Although the dissemination of information is potentially a con for businesses, for traders it makes the analysis of a company and its share price trajectory much easier because the information is readily available.
Before going public, a company should weigh the advantages and disadvantages to determine if it’s the right move to make.
More about the consortium, how it will be profitable, how can we go for this procedure and what are the terms & condition for the consortium will be discussed in my next article.
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