Initial Public Offering (IPO) is the first issue of
company shares to the public. Usually, new entities aim at collecting sufficient capital
in order to expand their operations. This act allows them to raise extensive capital and secure their
sustainable growth. There are several benefits arising from a successful listing on the capital markets.
Firstly, the IPO gives access to funding which helps in the completion of strategic mergers and
acquisitions. Secondly, it offers an opportunity to expand businesses into new markets. Thirdly, the IPO
enhances the perception of businesses and brands in the eyes of the customers, employees, and potential
investors. For these reasons, some leading companies also opt for initial public trading. A justification is
that the entities are not required, under existing legislation, to repay this capital. Rather than that, the
investors are entitled to a portion of the profits and the
right to participate in the distribution of capital if the company dissolves.
The IPO typically involves one or more financial institutions, or investment banks, which raise capital and trade with securities on the capital markets. The issuing company enters an agreement with the investment bank to sell its stock. The actual sale may be conducted in a variety of ways. For instance, the best effort contract mandates that the underwriter sells as much stock as possible at the agreed price. The all-or-none contract mandates that the investment bank sells the whole stock or the contract is considered void. Under the terms of the bought deal, the underwriter actually purchases the shares of the issuer. Typically, the issuer makes large discounts and the shares are easy to sell on the stock market. Under the firm commitment contract, the investment bank guarantees the sale of the whole issue at the negotiated price. This type of agreement is the riskiest for the underwriter and consequently, the most expensive for the issuing entity.
Free charting webinar
Mon, Nov 18th, 2013 12:00 PM - 1:00 PM EST
During the 60 minute session Paul Coghlan, founder of Coghlan Capital, looks at current charts for currencies, precious metals, US indices, highlighting turns and low risk entry points using the Median line analysis methodology.
Median line analysis reduces risk and increases the chartists ability to see trend direction, trend
strength and highlight entry and exit levels.
Seats are limited so be sure to reserve your spot today. The webinar will be recorded, by signing up you'll receive an email with the webinar replay afterwards.