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IPO — Initial Public Offering
IPO Full-Form refers to Initial Public Offering. IPO is the purchase of a company’s shares by the institutional investors, who then sell the shares to the public for the first time on the basis of the securities exchange. This process is used by a company for transforming into a publicly held company. The companies use the IPOs for raising the capital’s expansion for monetizing the investments of private investors. When the trading of shares is performed freely in the market after the completion of the IPO, the money usually passes between the company’s public investors. The IPO process is also called going public.
There are numerous benefits of the IPO. It assists the company in creating public awareness pertaining to the company since the public offerings help in generating publicity. It also helps a company or an organization by raising funds that can be utilized in numerous operational purposes of the corporation. These operational purposes include expansion of marketing, equipment, and plant, working capital, acquisitions, development, research, and merges.
The traded share has a market value assigned to it. The company can resell this share. This fact is highly helpful since companies offer stock incentive packages to its employees. On the other hand, it provides the alternative to the investors to trade their shares for a particular price. The share’s public trading helps by determining the company’s value. This proves favourable for the company in instances where the company desires a merger or acquisition. The wealth associated with the company also increases through the IPO, without the need for the division of the authorities.
Although the IPO assists in raising a large capital for the company issuing it, certain investments need to be made by the company which is launching the IPO. The economic performance of an organization may not always improve by an IPO. The parent company incurs a continuous expenditure after the IPO is set up, like accounting fee, printing costs, legal fee, etc. These expenses may cost a large amount of money.