What is IPO?
A company offers shares to the public after IPO. IPO is the first sale of shared by a private company to the public, and by this step, a private company becomes a public company.
There are some advantages listed below for companies which allow the general public to invest in their company.
- The most satisfying advantage of companies allowing the general public to invest in their company is the ability to raise share capital. Now the public can be used by freshly converted public companies for raising share capital. It is so because now the public will be investing in the company as the company has become public now, there is no possible way for a company to raise money much more quicker than by raising it through the public.
- As the public becomes the part of the public company so loses and profits are also shared among them. As the public will benefit from a public company’s profits, it will also have to suffer loss whenever a public company goes through loses. Going public works as a safety net for public companies and then the burden of loses does not hang upon the company’s shoulders only and is distributed to a fair amount with the public investing in the firm.
- Because those couple of angel investors will then influence the proceeding of the company to an extent which can be too much in a private company which is not the case with the public company as they do not have a couple of big investors but a huge number of small and average sized investors.
- Many potential sources of finance. Banks and other financial institutions tend to extend finance to a public company, particularly to the companies that are listed.
- A company offering to the general public to invest in their company can pursue new projects, products, and markets, make a capital expenditure to enhance and support the business, grow organically, fund development and research and make acquisitions.
- Companies that allow the general public to invest in their company to enjoy prestigious profile and confidence, adding ‘plc’ at the end of a company name can add standing and prestige. It builds the status of a public company and this effects on how a business is viewed. A public company is expected to be known by many people in comparison to a private company.
- Public companies have much more transparent than those private companies. In public company books of records are easily available, and there are very few things which are kept from the public rest everything is in front of the public, and they can crosscheck whenever they wish to.
- There are rarely any restrictions on transferring of shares, unlike in a private company. Transferring shares in a public company is a lot easier than in private companies. There are very few obligations and rules for transferring shares in a public company, and there are no restrictions on how many shares and how many times shares can be transferred.
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