“My grandmother was a great cook”, this is something many of us remember telling our friends, “She could have started a business selling her cakes”. This could be a common thought in many people’s minds that they wish their grandmother or father or someone in the family had started a business selling stuff or services that they were experts at.
Times were different then. Those days, people gladly worked with and for their family. Very few people actually thought of starting a business in any area. Then also they used their own savings and borrowed money from some known people. Borrowing from banks and institutional finance came into the picture much later.
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Once this concept became popular, many people could take their business ideas forward. Already established companies also look at options for expansions. And that is how the Initial Public Offerings or IPOs came about.
So who can offer an IPO?
An IPO can be offered by any kind of company, whether it is a small, new startup or a big established company. The reason behind the offering is the same. It is to collect money for the company. If we go back to the historical evidence, then Dutch merchants and English businessmen collected money and formed companies. The main aim was to collect a good corpus of money to start or expand a business.
The aim remains the same, but today after an IPO is offered then the stocks of the company are sold to individual investors or institutional investors. The company is listed on the stock market and then the stocks can be traded. The prices keep fluctuating based on the performance of the company.
Important aspects of IPO
There are many important factors that are considered before launching an IPO. It is a very complicated process and all the financial aspects and legal features need to be worked out in detail by their respective experts. They also engage with a big bank or financial institution, which is then known as the underwriter of the issue of stocks. There may be more than one underwriters at times when the issue is very big. They also engage the services of one book runner or lead manager. This is in order to finalize the price of shares. The share should not be overpriced or it may remain undersubscribed.
If you are interested in issuing an IPO, then take the help of experts for guidance. On the other hand, if you want to know whether to buy the shares of an IPO then read the prospectus and make an informed choice.