Initial public offering

I am sure some of you guys must have heard about ZOMATO IPO launch news. It was really everywhere be it social media or the newspaper.

The initial public offering is commonly known as IPO, it is the way through which an organisation goes public by offering its shares to the people. Once an organisation goes public from being a private company then the company becomes a publicly traded company through IPO processes.

We already know private companies have very limited shareholders with them. The company gets its name on the stock market. Read more on tech giant TCS.

What does it mean for a company going IPO?

All of us are aware of the word IPO but we do not know why exactly companies go public and what are all the procedures for a company to go public. As the term Initial refers to starting that is understood that the company is offering shares to the public for the first t to public that is why we say Initial public offering let us understand it more deeply the first person who comes into the picture is Entrepreneur i.e the Promoter who starts his company as he newly established the company he does not have a lot of revenue to take his idea further so what he can do is to ask his friends or relatives to invest in his company so that the revenue could be generated and those who invest in his company at this initial stage are called angel investors the angel investor can be only one person or two or three it completely depends how much capital is required for an Entrepreneur and how much he is invested the amount obtained by them is called seed fund and when this seed fund is included in the company’s bank account it will the share capital of the company. Read more about tech here.

 

How does an IPO work?

A company is considered a private until it went to IPO to be public, in the case of being public the shares are not listed before on the exchange.

Companies have to apply through your broker ID using your UPI.

There are three categories of investor

1. Retail investors.

2. High net worth investors who invest in IPO with more than 2 lakh Rupees.

3. Institutional investors like mutual funds, pension funds, provident funds.

 

In case if it is not possible to allocate one lot to each investor then the shares are allotted based on a lottery system.

So it depends on luck, once the allotment is done, such shares get listed in the secondary market and can be traded. To know more about the initial public offering blogs in detail please visit here.

Major advantages:

●      Provide the company with capital.

●      With the liquid market, IPO provides the shareholders

●      Raise the profile of the company.

 

Major disadvantages:

●      Time and responsibility for filing public reports.

●      Time and responsibility of managing a large shareholder base and public attention.

●      The additional liability risk that comes with being a reporting company and having a large, dispersed shareholder base.              

 

Conclusion

IPO is one of the means through which the company reaches the scale of proportion and seeks to raise capital from the markets in the form of an Initial Public Offering. Cash is necessary for the company to grow their capital and expenditure.  The biggest advantage is that the company is infused with liquidity and gains the power to add revenue potential. The downside is that stakes get diluted and the market cap of the stock becomes market-related and can be affected by external factors too. The best way to raise capital for a small company is through an IPO. Going the IPO route has its advantages and disadvantages, the biggest advantage being the sheer amount of liquidity it brings to the company.