REAPING THE REWARDS OF GOING PUBLIC : A COMPREHENSIVE LOOK AT IPOS

 

Initial Public Offering is a process by which a company raises capital from the public for the first time . It Involves issuing shares of the company to the general public and public and there by providing them an opportunity to own a part of the company . The company can use the capital raised through the IPO for various purposes such as business expansion , debut reduction , or to fund research and development activities.

MECHANISM OF IPO

The process of an IPO starts with the company deciding to go to public. After which the company hires an investment bank as an underwriter , which is responsible for pricing the shares and finding buyers. The underwriter also helps in preparing the necessary documentation such as the prospectus , which is a document containing all the information about the company. The company then files the prospectus with the regulatory body in India it is  Securities and Exchange board of India ( SEBI) , for approval . Once approved , the shares are priced and the IPO is launched . Investors can apply for shares through stockbrokers or directly from the company.

MERITS

• The primary benefit of IPO is that it provides large amount of capital that can be used for the growth and expansion.
• IPO makes it possible for the company's founders, early investors and employees to sell their shares providing them with liquidity.
• It helps to boost brand awareness.
• Financial discipline.

DENERITS

• High cost
• Wide range of regulations.
• Short term focus.
• Loss of control