It's not hard to reason this one but you migh...
Initial Public Offering or an IPO is the first sale of a private company's stock to the public. Typically, companies that are small in size and are relatively young, tend to issue IPOs in an attempt to expand their capital. However, big private companies also go this route, when they want to be traded publicly.
While undertaking an IPO, most companies enlist the help of investment banking firms known as underwriters. These organizations assist in correctly evaluating that company's share price.
Once a company goes public, money from investors goes directly to it rather than to a later trade of shares between investors. This, therefore, allows for a wider pool of investors for a company. A public company can also offer extra common shares through secondary offerings. This can give it more capital without having to borrow--and, therefore, incur a debt.
Apart from this, IPOs also help bolster and diversify the equity base, while giving the company much-needed public exposure. An IPO also entails easier aqcuisitions and cheaper bank loans!
However, going public also costs a lot in terms of legal, accounting and marketing fees. There is also a risk factor involved when it comes to raising the money required--which is completely dependant on random investors, and therefore, on the marketing! Besides that, a publicly traded company has no secrets. In other words, its competitors know everything they need to about it!
As a result, companies think long and hard before issuing IPOs. Recently, Facebook, Inc. issued an IPO, where it was valued at $38 a share. The overall price of the social networking website was valued at a whopping $104 billion. This is the largest ever valuation for a newly public company!
Having said that, not all social media giants are eager on issuing IPOs. This was made amply clear when Twitter CEO, Dick Costolo when he told the Los Angeles Times that his company was in no rush to go public. According to him remaining private gives his company more leeway to do business any way they want--and not be at the mercy of a quarter-to-quarter business growth model.
-Picture courtesy Reuters-
you might also like
With Skyfall, director Sam Mendes mixes the old an...
If Bollywood ever went down the 007 agent route, w...