What is Initial Public Offering (IPO)
The process through which a private company issues its shares to the public for the first time and gets listed on the stock exchanges.
- In Initial Public Offering (IPO) company can raise funds by issuing fresh shares or promoters can sell their existing stakes or both.
Why Company Needs IPO
To Raise Capital (Fresh Issue)
The company needs money to grow and expand the business, and pay off existing debts. Initial Public Offering (IPO) is a way to raise capital.
**To raise capital, the company can borrow from banks as debt. It will increase company expenses and may cause a hindrance to growth rate, as the company has to pay interest and borrowed amount. The bank may also decline borrowing requests if they have borrowed a lot already.
Allowing Owners, Promoters and Early Investors to Sell Their Stake
The owners, promoters, and early investors of the company may sell their shares to institutional and retail investors through Initial Public Offering (IPO).