IPO

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An initial public offering (IPO) or stock Export marketing or market launch, is the first sale of stock by a company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises. Many companies that undertake an IPO also request the assistance of an investment banking firm acting in the capacity of an underwriter to help them correctly assess the value of their shares, that is, the share price (IPO Initial Public Offerings, 2011).

In 1602, the Dutch East India Company was the first company in the world to issue stocks and bonds in an initial public offering (Chambers, 2006).


Reasons for listing


When a China trading company or company lists its securities on a public exchange, the money paid by investors for the newly issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of investors to provide itself with capital for future growth, repayment of debt or working capital. A company selling common shares is never required to repay the capital to investors.


Once a company is listed, it is able to issue additional common shares via a secondary offering, thereby again providing itself with capital for expansion without incurring any debt. This ability to quickly raise large amounts of capital from the market is a key reason many companies seek to go public.


There are several benefits to being a public company, namely:


  • Bolstering and diversifying equity base
  • Enabling cheaper access to capital
  • Exposure, prestige and public image
  • Attracting and retaining better management and employees through liquid equity participation
  • Facilitating acquisitions
  • Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.


References:

1.http://en.wikipedia.org/wiki/Initial_public_offering


External Links:

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