India Cements Investment Services Ltd

Initial Public Offer

IPO means Initial Public Offering. It is a process by which a privately held company becomes a publicly traded company by offering its shares to the public for the first time. A private company, that has a handful of shareholders, shares the ownership by going public by trading its shares. Through the IPO, the company gets its name listed on the stock exchange.

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How does a company offer IPO?

A company before it becomes public hires an investment bank to handle the IPO. The investment bank and the company work out the financial details of the IPO in the underwriting agreement. Later, along with the underwriting agreement, they file the registration statement with SEC. SEC scrutinizes the disclosed information and if found right, it allots a date to announce the IPO

Why does a company offer an IPO?

Offering an IPO is a money-making exercise. Every company needs money, it maybe to expand, to improve their business, to better the infrastructure, to repay loans, etc
Trading stocks in the open market mean increased liquidity. It opens door to employee stock ownership plans like stock options and other compensation plans, which attracts the talents in the cream layer
A company going public means that the brand has gained enough success to get its name flashed in the stock exchanges. It is a matter of credibility and pride to any company
In a demanding market, a public company can always issue more stocks. This will pave the way to acquisitions and mergers as the stocks can be issued as a part of the deal