Initial Public Offering

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Initial public offering (IPO):
An initial public offering (IPO) is a type of public offering where shares of stock in a company are sold to the general public, on a securities exchange, for the first time. Through this process, a private company transforms into a public company. Initial public offerings are used by companies to raise expansion capital, to possibly monetize the investments of early private investors, and to become publicly traded enterprises. A company selling shares is never required to repay the capital to its public investors. After the IPO, when shares trade freely in the open market, money passes between public investors. Reason for listing

When a company lists its securities on a public exchange, the money paid by investors for the newly-issued shares goes directly to the company. An IPO, therefore, allows a company to tap a wide pool of investors to provide it 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.

Advantages:
IPO helps the company to create a public awareness about the company as these public offerings generate publicity by inducing their products to various investors.

The increase in the capital: An IPO allows a company to raise funds for utilizing in various corporate operational purposes like acquisitions, mergers, working capital, research and development, expanding plant and equipment and marketing.

Liquidity: The shares once traded have an assigned market value and can be resold. This is extremely helpful as the company provides the employees with stock incentive packages and the...
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