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IPO/FPO/Public Issue


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About IPO/FPO/Public Issue

IPO

The process of offering shares in a private corporation to the public for the first time is called an initial public offering (IPO). Growing companies that need capital will frequently use IPOs to raise money, while more established firms may use an IPO to allow the owners to exit some or all their ownership by selling shares to the public. In an initial public offering, the issuer, or company raising capital, brings in underwriting firms or investment banks to help determine the best type of security to issue, offering price, amount of shares and time frame for the market offering.

FPO

A follow-on public offer (FPO) is the issuance of shares to investors by a public company that is currently listed on a stock market exchange. An FPO is a stock issue of additional shares made by a company that is already publicly listed and has gone through the IPO process. FPOs are popular methods for companies to raise additional equity capital in capital markets through an issue of stock.

PUBLIC ISSUE

If a company decides to raise capital by issuing stock, it must file a formal registration statement with the Securities and Exchange Commission (SEC) that details the business's financial history, current financial situation, the proposed public issue and future projections. The company must also prepare a preliminary prospectus that contains information similar to that of the registration statement for potential investors.

Advantages Of An IPO

Notice for non filing of one's ITR

The primary objective of an IPO is usually to raise capital for a business. However, a public offering has other benefits as well.

  • A public company can raise additional funds in the future through secondary offerings because it already has access to the public markets through the IPO.
  • Many companies will compensate executives or other employees through stock compensation. Stock in a public company is more attractive to potential employees because shares can be sold more easily. Being a public company may help a company recruit better talent.
  • Merger and acquisition activity may be easier for a public company that can use its shares to acquire another firm. Similarly, it is easier to establish the value of an acquisition target if it has publicly listed shares.

Some companies will conduct an IPO because of the prestige and credibility it imbues. This may be a factor for future lenders who might be more willing to make loans at more favorable terms if they know the company has a diversified shareholder base and is accountable to the SEC for accurate financial reporting. However, the real value of intangible advantages like prestige are difficult to measure.

Reasons

PUBLIC ISSUE

Going public raises cash - usually a lot of it . Being publicly traded also opens many financial doors:

  • Because of the increased scrutiny, public companies can usually get better rates when they issue debt.
  • As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of the deal.
  • Trading in the open markets means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent.
  • Being listed on a major stock exchange carries a considerable amount of prestige. In the past, only private companies with strong fundamentals could qualify for an IPO and it wasn't easy to get listed.

Types of Follow-On Public Offers

There are two main types of follow-on public offers. The first is dilutive to investors, as the company’s Board of Directors agrees to increase the share float level or the number of shares available. This kind of follow-on public offering seeks to raise money to reduce debt or expand the business. Resulting is an increase in the number of shares outstanding.

The other type of follow-on public offer is non-dilutive. This approach is useful when directors or substantial shareholders sell off privately held shares. With a non-dilutive offer, all shares sold are already in existence. Commonly referred to as a secondary market offering, there is no benefit to the company or current shareholders.

Frequently Asked Questions

Definition of 'IPO' Definition: Initial public offering is the process by which a private company can go public by sale of its stocks to general public. ... After IPO, the company's shares are traded in an open market. Those shares can be further sold by investors through secondary market trading.

In an IPO a company's owners sell a portion of the firm to public investors. This is usually done through an underwriting process that looks and acts a bit like a pyramid. The company negotiates a sale of its stock to one or more investment banks that act as an underwriter for the offering.

Going public refers to a private company's initial public offering (IPO), thus becoming a publicly traded and owned entity. Businesses usually go public to raise capital in hopes of expanding. Venture capitalists may use IPOs as an exit strategy (a way of getting out of their investment in a company).

If you want to purchase stock at the IPO or afterward, register with a stockbroker and wire funds to your brokerage account. When the IPO occurs, call your broker or go online, enter the stock symbol of the company and purchase the amount of shares you want

FPO (Follow on Public Offer) is a process by which a company, which is already listed on an exchange, issues new shares to the investors or the existing shareholders, usually the promoters. FPO is used by companies to diversify their equity base.

A follow-on public offer (FPO) is the issuance of shares to investors by a public company that is currently listed on a stock market exchange. An FPO is a stock issue of additional shares made by a company that is already publicly listed and has gone through the IPO process

Because of the increased scrutiny, public companies can usually get better rates when they issue debt. - As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of the deal.

Primary market is a market wherein corporates issue new securities for raising funds generally for long term capital requirement. The companies that issue their shares are called issuers and the process of issuing shares to public is known as public issue.

The management of securities of the corporate sector offered to the public on a regular basis, and existing shareholders on a rights basis, is known as public issue management. The management of issues for raising funds though various types of instruments by companies is known as Issue management.

A public offering is the offering of securities of a company or a similar corporation to the public.The company issues additional securities to the public, adding to those currently being traded. For example, a listed company with 8 million shares outstanding can offer to the public another 2 million shares.

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