Initial Public Offering (IPO)
Initial Public Offering is the first sale of stock by a company to the general public. Stock is an instrument that signifies an ownership position (called equity) in a corporation and represents a claim on its proportional share in the corporation’s assets and profits. The goal of an IPO is to raise a specific amount of money through the issue of stocks to meet the business objective and get the initial stockholders wealth to the next level.
What are the benefits of IPOs?
For businesses, stocks and shares are a fast way to raise revenue for business expansion and growth. They can take the business to the next level. By becoming a publicly traded company, a business can take advantage of new larger opportunities and can start working towards incorporation and even worldwide expansion. IPO gives a company fast access to public capital. Even though public offering can be costly and time consuming, the trade-offs are very appealing to companies. IPOs also have relatively low risk for businesses and have the potential for huge gains and huge opportunities. The more investors wish to invest in a company, the more the company stands to or from IPOs and other stock offerings.
For the investor, IPOs are attractive mainly because they are undervalued. Initially, to make IPOs more attractive, many companies offer their initial public offering at a low rate. This encourages investors to buy IPOs thinking that the new company will grow substantially and they would have huge profit margins. As prices grow, the demand for the IPOs also grows and hence early investors stand to profit considerably.
- Future Ventures India
- Galaxy Surfactants
- Coal India
- Betul Oil