yandex watch
forex ask logo
forex ask banner
Welcome, Guest

Forgot Password

Not yet a Member? Register Here

Loader

What are IPOs?

IPOs or Initial Public Offerings are a company’s first sale of stock to the public. This is because companies are generally categorized into two categories, the private companies and the public companies.

Private companies are owned privately with shareholders lesser in number and information about the company kept mostly confidential. Usually, small companies are private however big companies can be private as well just like Hallmark Cards and Domino’s Pizza. Because it’s private, shares of these kinds of companies are not sold to the public. Instead, people may invest but nothing is sold. These companies raise money by issuing equities or debts.

Meanwhile, public companies are those companies that have opened their doors to scrutiny and analyzation so that they may be able to sell their stocks on the stock exchange. Public companies have parts of their stocks owned by the public or the traders in a stock exchange. Shareholders may number up to the thousands with their own rules and regulations to abide by. Public companies are required to have a board of directors and must issue a quarterly report regarding their finances. The first issuance of debt or equity to the public to raise money is called the initial public offering. These IPOs are traded in the open market like other commodities.

IPO is a widely used term that first became popular in the late 1990s. From Silicon Valley, where most internet companies are based, millionaires popped up like daisies on a clear spring day as owners banked on IPOs. These IPOs from internet companies made overnight millionaires of their owners.

As seen in the example above, advantages of going public include the potential for exponential growth in raised money, better rates during issuance of debt due to publicized information, unlimited stock issuance so long as there is market demand, and the appeal of liquidity due to stocks being traded in an open market. That’s why a lot of companies are compelled to go public.

Throughout the history of IPOs, the companies that go public increased sharply. Going public became synonymous to expansion of business. Small start-ups began issuing IPOs like wildfire. However, it also became an easy way to get rich with these companies having no intentions of making more profit, the IPOs became a way to exit the market arena with lots of cash and losses for their shareholders.

IPOs are a lucrative business, and just like any other financial instrument, it carries risks that require research and analysis if you want to profit in it.

Created by : John
Published : 29 Jul 2015

No have comment

Comment :

Comment
<a href="https://www.instaforex.com/">InstaForex portal</a>
<a href="https://www.instaforex.com/">Forex Portal</a>
<a href="https://www.instaforex.com/">InstaForex portal</a>