What is an initial public offering?
Initial public offering is the process through which a company offers its stock for the first time to the public. IPOs are mainly offered by new companies backed by a robust business model and have a vast scope of expansion in the future.
IPOs are launched with the intention to raise funds from the public to finance growth. These companies are in the business for quite some time but they sell a part of its ownership to the public in order to raise business capital. Thus, the buyers become the stakeholders in the company.Â
Why invest in IPO’s?
Gives opportunity for growth: Investing in the right IPO right at the time the company is listed, gives you an opportunity to ride the market risks and multiply your investment.
Ride the market volatility: IPOs are launched at the time of stock market boom. Thus, you can ride the bullish market and earn considerable returns.
Buy low and sell high: When the IPO is offered, you buy at a lower price. When the stock is listed in the secondary market the price fluctuates thus enabling you to earn good profit.
Why is an IPO offered?
The main objective of an IPO is to maximize value for the shareholders. When a company lists its securities on the public exchange, the money received from the investors goes directly to the company. An IPO, allows a company to open its stocks to a large pool of investors for raising money for repaying debt, amassing working capital or funding a new venture.
The companies issue their shares in the primary market through the process of initial public offering (IPO) and further public offerings (FPO). In the primary market the trading takes place directly between the investors and the company. Through IPO companies launch shares for the very first time in the primary market while with FPO the already listed companies offer fresh equity in the market to raise additional funds.