Dear readers, this article is something that you need to understand and grab once you have the cash and the chance because, if eventually you get the ins and outs or the nitty gritty of doing this form of business, then you will reap a bountiful harvest, money wise, sooner or later than expected.
One of the most essential practices of trading, industry and monetary businesses is the so-called IPO. IPO basically involves selling stocks a lot. Before we go further, let’s elaborate deeply what IPO means. It is aptly defined as an initial public offering, or an IPO, is the primary or the very first sale of stock by a certain company to the buying public. A company can generate money by deciding to get it either as a debt or equity. If the company did not issue equity to the public, then this is known as an IPO.
Usually every company may be categorized into two broad types: private and public.
A privately managed company has lesser shareholders and its owners do not necessarily have to tell much information about their company. Anyone can go out and build or incorporate a company: just place some money, file the precise needed legal documents and do exactly the reporting guidelines of your jurisdiction. Small businesses are mostly held privately. However, big companies can sometimes be private too.
Typically, it has never been a practice or even possible to buy a share in any private company. You may talk to them about investing, but they may not be obliged to sell you anything from their company. Public companies, on the other hand, may have sold at least a good part of their company to the public and eventually trade it on a stock exchange for better investment return. Hence, doing an IPO is similarly referred to as “going public.”
Public companies usually have hundreds or even thousands of shareholders and are therefore subject to strict rules and policies. They should have a board of directors and they should also report financial status every quarter. In the United States and most countries in the world, these public companies are required to report to the Securities and Exchange Commission (SEC). In other countries, public companies are managed by governing personalities or government officials similar to the SEC. From an investor’s vantage point, the most interesting part about a public company is the fact that a stock is traded in an open market, just like any other commodity. If you have the needed cash, you can easily invest. The CEO may raise his eyebrows with your guts, but there’s nothing which he or she can do to stop you or anyone from buying stock.
But why go public?
Obviously, going public raises money, and usually a lot of it. Being traded publicly also opens many financial possibilities and doors:
- Due to the increased scrutiny, these public companies can usually take better rates and earnings when they issue debt.
- As long as there is a market demand, a public company may always issue more and more stock. Thus, mergers and other type of acquisitions are the easiest way to do because s these stocks can be issued as part and parcel of the deal.
- Trading in the public or open markets means transparency and liquidity. This makes it a possibility to implement other things such as employee stock ownership plans, which may aid in attracting big shot and top talents or investors.
Indeed, to be part of a major stock exchange carries within it a considerable amount of prestige. In the past years, only the private companies with strong foundations or background could qualify for an IPO and during those time it wasn’t easy to be listed.
Thanks to the internet boom which changed all this. Firms no longer need to have a strong track record in terms of financial and a solid history to go for public trading. Instead, IPOs were practiced by smaller businesses seeking to expand their source of bread and butter. There is obviously nothing wrong if you want to expand, but most of these companies had not actually made a profit and did not plan on becoming profitable any time soon. Founded on the so-called venture capital funding, they spent a lot of money trying to raise enough excitement in order to make it to the market before eventually burning through all their hard earned cash. In these scenarios, companies may then be suspected of doing an IPO merely in order to make the founders or CEO’s richer. This is referred to as an exit strategy, trying to imply that there’s no desire to stay put around and create more investment for shareholders. The IPO then in this case turn out to be the end of the road instead of being the beginning.
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As a conclusion, always remember: an IPO is just selling of stock. It is all about the sales job. If you can close deals with a lot of people to buy those shares or stocks in your company, then you can raise truly a lot of money. The question now is, how reliable and witty as a sale person are you to make good in this business? The answer is in your hands…Act now and get rich!
