All You Need To Know About Initial Public Offering Or IPO (Part 1 of 5)

My sharing will be split into 5 Parts for your easy digestion, here you go…

IPO Part 1 of 5 : Intro to IPO

An initial public offering—or IPO as it’s most commonly called—is the process by which companies go from private to public and sell stocks shares in their firm.

IPOs don’t happen overnight and take a lot of effort to put together.

What is an IPO?

If a company wants to sell stock shares to the general public, it conducts an IPO. By doing so, a company goes from the status of private (no general shareholders) to public (a firm with general shareholders).

Private companies can have shareholders, but they are few in number & they and the firm are not subject to regulations by the Securities and Exchange Commission (or SEC) in the States or the Singapore Stock Exchange (or SGX) This changes dramatically with an IPO.

Why does a company go public?

1. It’s simply a money-making move. The idea is to raise funds and have more liquidity or cash on hand by selling shares publicly.

The money can be used in various ways, such as re-investing in the company’s infrastructure or expanding the business.

2. An added benefit from issuing shares is that they can be used to attract top management candidates through the offer of perks like stock option plans.

3. Another plus from going public benefit is that stocks can be used in merger and acquisition deals as part of the payment.

4. There’s also the prestige—bragging rights for some firms—of being listed on a major stock exchange like the NYSE or Nasdaq.

(to be continued…look out for IPO Part 2 of 5)