We will know about the What Is an Initial Public Offering (IPO)?
What Is an Initial Public Offering (IPO)?
Meaning:
Initial Public Offering (IPO) is a the process of offering of share of a private company to the general public as a new stock issuance for the first time. IPO helps the company to generate more money to the company with dilusion of the equity.
The companies need to fulfill all the requirements before issuing IPO. Securities board of Nepal (SEBON) looks after all the documents whether the company is eligible for the IPO or not.
IPO is public offering through primary market which help the company to generate capital. With the help of IPO, even the local or general people can be part of the good company.
Investment banks and capitals works as underwriter to issue the IPO.
What is the IPO process?
Company normally issue IPO for collecting capital from people at large. The company need capital for various purpose such as expanding of company, for payment of loan, etc.
IPO is conducted in two process. Firstly, the company does marketing of the IPO through advertisement, distributing pamphlet’s, etc. Secondly, the company choose a underwriter ( Investment banks, capital, etc) for issuing of the IPO.
The major steps of IPO is publishing prospectus, choosing underwriter, building IPO team, Documentation, Marketing & updates, boards & process, and finally IPO issue.
Advantage and Disadvantage of IPO
Advantage
Following is the advantage of the IPO
- The company get good amount from IPO to run the company smoothly.
- IPO helps company to get exposure, prestige, branding building and image building.
- The company will publish quarterly which helps the loan provider whether loan should be given or not.
- IPO helps the general people to be the part of the big companies.
Disadvantage
Following is the advantages of the IPO.
- Some company issue IPO in premium which makes it expensive for many people.
- After IPO, the company need to publish all the documents such as balance sheets, audit reports, profit and loss account, etc. Hence, due to this company’s some secret might get revealed.
Frequently Asked Question:
What Is an Initial Public Offering (IPO)?
= IPO is public offering through primary market which help the company to generate capital. In return, company need to dilute its equity holding.
Other Important Links:
Meaning of Equity Share: CLICK HERE
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