Week - 5 | What is IPO in Share Market & How to Invest? | All About Initial Public Offering

Published: 09 March 2023
on channel: Consult Gurpreet
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The Initial Public Offering, or IPO, is a one-of-a-kind process that allows a private firm to become a public company by issuing shares. The issuance of public shares allows the company to raise capital while also providing an outstanding chance for the general public to invest and earn returns on that investment.
A private company expands at first with its early investors, founders, and stakeholders. When a firm achieves a specified goal, the management realises that it is stable enough to handle SEC (Securities And Exchange Commission) laws, grow, and diversify utilising money from the general public, the company decides to issue an Initial Public Offering. With this, the general public is given a stake in the company in the form of shares.

One of the primary motivations for a company going public is to raise finance. Companies use this funding to help them build and grow their businesses. Going public also lowers the overall cost of capital and gives significant leverage in negotiating interest rates with lenders. Furthermore, capital raised through an IPO incurs no interest charges and is not required to be repaid.
Another motive for issuing shares is to compensate for acquiring and retaining employees. Going public can sometimes be done to provide an escape for fluttering money.

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