IPO – Initial Public Offering

Let’s explore what an Initial Public Offering (IPO) is and how it works:

Definition:

An IPO is the first public offering of shares by a private company when it becomes a public company.

During an IPO, the company sells its stock to the general public for the first time.

It marks the transition from private ownership to public ownership.

Pre-IPO Stage:

Before an IPO, the company is private.

It has a small number of shareholders, including founders, family, friends, and professional investors (venture capitalists or angel investors).

The public - individuals and institutional investors - can’t invest until the company’s stock is available for sale.

IPO Process:

Companies hire investment banks to facilitate the IPO process.

The company issues new shares to existing shareholders or the public.

These shares are listed on stock exchanges and traded in the secondary market.

Benefits of an IPO:

Capital Raise: Companies can obtain significant funds for growth and expansion.

Exit Strategy: Founders and early investors can realise profits from their private investment.

Influence Retained: Even after an IPO, founders and early investors maintain influence in company management.

Remember, an IPO is a critical milestone for companies, allowing them to access capital and engage with a broader investor base.

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