What is IPO? Benefits of IPO to a company
What is IPO?
IPO (Initial Public Offering) is the process by which a privately held company becomes a publicly traded company by offering its shares to the public for the first time. It could be a new, young company or an old company which decides to be listed on an exchange and hence goes public.
With the help of IPO Companies raise equity capital by issuing new shares to the public or the existing shareholders can sell their shares to the public without raising any fresh capital.
After the IPO the company shares are traded in open market or stock maket. The stock market regulated by the SEBI (Securities and Exchange Board of India). The accounting practices of a company may become much more transparent following these practices. This transparency may benefit the company in the long run.
Benefits of IPO to a company
- To raise capital
- Increase Public Image
- Increase business opportunities
- Allowing to sell stake to make money
- Greater public awareness
- Maximize the company Valuation
1. To raise capital
Every company or firm need more money to increase there operation across the country or world. With the help of the IPO or make your company publcly is the best way to raise more capotal or funds for the company. To raise capital for growth and expansion
2. Increase Public Image
The public image of an enterprise also goes up once it has been publicly listed. It gets more recognition from suppliers and customers. Also, it becomes easier to attract companies.
The formation of a public market to the company’s shares at fair price creates liquidity and provides an opportunity to sell the shares promptly with minimal transactional costs. Listing gives an opportunity to entrepreneurs to liquidate a part of their holdings.
4. Increase business opportunities
With the help of IPO the company can increase their business opportunities and expand business in different location. Because for the business expansion company need funds.
5. Allow to selling stake to make money
IPO allowing owners and exiting investors to sell their stake to make money or raise more funds. A company becomes liquid through the sale of stocks in an IPO.
6. Greater public awareness
IPOs hold for small businesses is increased public awareness, which may lead to new opportunities and new customers. IPO may also generate increased attention in the business press.
7. Maximize the company Valuation
An IPO is an offer to a large number of institutional and retail investors to become shareholders of the company. Investors and their confidence in the liquidity of their investment in a public entity assure the company owners to achieving the maximum possible valuation of the business.