Learn how and why private companies get into share market and transform into public sectors – Initial Public offerings

What is IPO?  - Fundamentals 

Initial Public offerings, often known as IPOs, take place while non-public firms boost investment capital by removing by themselves “public” through “private”. They may be normally risky since you as general public certainly cannot predict what will happen on that 1st day of trading.

Through IPO process, a private company transforms into public. So, to go public a company first must be private. Private companies like TCS Ltd, Infosys Ltd, Indian Oil corp Ltd, Bharat petroleum corp ltd, Bajaj Finance etc are now public through IPO process.

When a private company decides to go public and have its IPO, it is assigned with an identification symbol called Stock Ticker. Same company listed in different stock exchanges will have different stock ticker/symbol. Check out the following table for better understanding.

Why IPO?

Private companies whose business is restricted to certain geographical area mostly wants to grow and expand their business national wide and eventually global wide. To do so, companies need big funding. To raise required fund companies have options out of which offering company shares to public is one most preferred.  

Here is how IPO process works?

Once when the company decides to raise fund by offering shares to public, it has to go through IPO process where the stock stocker/symbol is assigned, initial price of stock is decided and traded accordingly. There is lot more that ties into this process, bit in nutshell this is how Initial public offering works and privately held company transforms to public.

Benefits and Drawbacks

IPO offers following benefits to previously private companies

1) Increasing exposure, prestige, and public image

2) Broadening and expanding equity base

3) Empowering less expensive access to capital

4) Pulling in and holding better administration and representatives through fluid equity investment

5) Encouraging acquisitions (conceivably as an exchange for shares of stock)

6) Making numerous financing open doors: equity, convertible obligation, less expensive bank         credits, and so on.

Following are few of drawbacks associated with Initial public offerings

1) Chance that obliged funding won't be raised

2) Noteworthy lawful, accounting and advertising expenses, a number of which are progressing

3) Necessity to uncover financial and business data

4) Significant time, exertion and consideration needed of senior administration

5) Open dispersal of data which may be valuable to contenders, suppliers and clients.

6) Loss of control and stronger org issues because of new shareholders