What is an IPO?
IPO stands for Initial Public Offering, as represents the first time a private company is offered for sale and listing on the public share markets, like the ASX (Australian Stock Exchange).
Why invest in IPOs?
All investors like to find the next big thing and investing in IPOs can often present this chance.
Companies that IPO are typically fast growing, innovative companies that are looking for additional funds (from IPO investors) to take their businesses to the next level.
Why do companies IPO?
Companies seek to IPO for a few different reasons:
1) They have reached their limit of self funding their growth, with retained earnings and bank loans and need some new investment capital to further their business aspirations.
2) The founders may have all their wealth tied up in the business and are looking to realise some of this by bringing in external investors.
What are the benefits of listing via IPO?
The main benefit of listing via IPO is that you will bring external investors on to your books as shareholders and you become a publicly listed company. The majority of the largest businesses in the world are publicly listed.
As a publicly listed company you will be required to disclose all information about your business (including profits and losses) and in return you get an active market for your shares (you can buy and sell an interest in your company on the ASX) and you can also raise funds in future more easily by tapping existing investors, or debt markets.