Initial Public Offering (IPO)

An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It is the largest source of funds with long or indefinite maturity for the company. An IPO is an important step in the growth of a business. It provides a company access to funds through the public capital market. An IPO also greatly increases the credibility and publicity that a business receives. In many cases, an IPO is the only way to finance quick growth and expansion. In terms of the economy, when a large number of IPOs are issued, it is a sign of a healthy stock market and economy. When the company makes its first IPO to the public, the relationship is directly between the company and investors, and the money flows to the Company as its “Share Capital”. Shareholders thus become owners of the Company through their participation in the Company’s IPO and have ownership rights over the company. This is the largest source of funds for a company, which enables the company to create “Fixed Assets” which will be employed in the course of the business. The shareholders of the Company are free to exit their investment through the secondary market.