IPO 101: Reasons Why A Company Goes Public

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An initial public offering (IPO) depicts the very first time that the stocks of a company are out for sale, hence, going public for a particular company means that the business has obtained a stock exchange listing and is now offering securities for the general public to buy. Oftentimes, a company going public and offering its stock is considered a milestone for privately owned businesses.

This post will let you know the vital reasons why a certain company decides to go public.

Raising Funds

Usually, startup businesses find ways to finance their operations by going public. When they go public they are given the opportunity to make private arrangements with individual investors, capital firms and build alliances with even larger corporations. It gives a company the means to raise a lot of money.

Others do it to finance future expansion, fund research and development, plan growth and advancement and to repay or reduce existing business debts.

Moreover, a company needs to fully disclose its financial information. This is to give prospective investors the chance to analyze the potential growth of the said company to encourage them. Hence, such act can make it easier for a company to raise the funds needed.

Liquidity

When a company goes public, it gives its shareholders the chance to cash in the wealth they have shared with the business. After the IPO, a market is then created where investors are given the ability to sell their holdings.

Appraisal

When a company goes public, a market value is being set. A company deciding to go on an Initial Public Offering can be worth as much as the public is ready to pay for it. The appraisal of a company’s market value must be calculated accordingly and precisely so the general public and investors would not be overwhelmed.

Increased Awareness

When a company goes public, it increases the awareness of the public about its existence. IPOs can breed publicity since a number of potential customers will be able to recognize their products or services. It can be considered as a form of advertising, as the exposure makes its products and services known – hence, increasing sales and profits.

Credibility

After a company gets itself listed on a stock exchange, then, the perceived credibility and integrity of the company by the public increases. Nonetheless, an initial public offer offers a great venue for the public to recognize such company and ensure brand equity.

Conclusion

Indeed, there are a number of advantages for a company to have its shares publicly traded, however, before deciding whether to push an IPO or not, a company must be able to evaluate the pros and cons that can happen anytime. Also, when you go public, you should also learn to consider things that are for the best interest of your investors.


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  • IPO
  • initial public offering
  • investing
  • investor
  • stocks
  • brand equity
  • market value
  • business expansion
  • business research
  • business development