Everything You Need To Know About IPO
An IPO stands for initial public offering. It takes place when a company goes public with selling stocks for the first time. There are many steps to take when attempting to open your stocks to the public in this way– from choosing an investment bank or underwriting firm to handle your stocks in the market, to going through all the steps and requirements to be able to qualify.
It will take about a year to prepare a company for an IPO. For this the help of accountants, lawyers and bankers is truly essential. A corporate service company that offers consulting services regarding financial and legal aspects will be able to help with the procedure as well.
The Good And Bad Of IPO
Although conducting an initial public offering will open up a company to stock market investors and increase the cash flow, there are certain risks involved. On the positive side, it is a way to raise capital. The company will now have a presence in the stock exchange market. The public image will easily attract quality personnel for the improvement of the corporation.
However, one of the negative aspects of making an IPO is that the company is now required to annually submit audits and reports. This is a time consuming job that will also expose the strengths and weaknesses of a corporation to the public and its competitors. A shareholder will now have the right to advance lawsuits against a public company.
Earning From An IPO
Earnings from this activity will go straight to the corporation, unlike later trades when the transaction involves investor-to-investor exchanges. Investors take the risk of buying IPO stocks for the promise of returns as the market for these stocks rises. The sale of these initial stocks then infuses a company with funds.
The investment banking experts will be able to determine the right moves such as when to issue these stocks, at what price, and whether they should be common or preferred stocks.