INITIAL PUBLIC OFFERING (IPO)
The first public offering of equity shares or convertible securities by a company, which isfollowed by the listing of a company’s shares on a stock exchange, is known as an ‘
’. In other words, it refers to the first sale of a company’s common shares toinvestors on a public stock exchange, with an intention to raise new capital.The most important objective of an IPO is to
for the company. It helps a companyto tap a wide range of investors who would provide large volumes of capital to the company for future growth and development. A company going for an IPO stands to make a lot of moneyfrom the sale of its shares which it tries to anticipate how to use for further expansion anddevelopment. The company is not required to repay the capital and the new shareholders get aright to future profits distributed by the company.
Companies fall into two broad categories: Private and Public
A privately held company has fewer shareholders and its owners don't have to disclose muchinformation about the company. When a privately held corporation needs additional capital, itcan borrow cash or sell stock to raise needed funds. Often "going public" is the best choice for agrowing business. Compared to the costs of borrowing large sums of money for ten years or more, the costs of an initial public offering are small. The capital raised never has to be repaid.When a company sells its stock publicly, there is also the possibility for appreciation of the share price due to market factors not directly related to the company. Anybody can go out andincorporate a company: just put in some money, file the right legal documents and follow thereporting rules of jurisdiction such as Indian Companies Act 1956. It usually isn't possible to buyshares in a private company. One can approach the owners about investing, but they're notobligated to sell you anything. Public companies, on the other hand, have sold at least a portion