Initial Public Offering - étude en anglais

IPO

An initial public offering or stock market lunch is the first sale of stock by a private company to the public on a securities exchange. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.

In an IPO, most companies obtain the assistance of an investment banking firm acting in the capacity of an underwriter which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market.

An IPO accords several advantages to companies:

• Cheaper access to capital

• Creates multiple financing opportunities: equity, cheaper bank loans, etc.

• Increases exposure, prestige and public image

• Facilitates acquisitions

But to complete an initial public offering, there are several disadvantages:

• Requirement to disclose financial and business information

• Significant legal, accounting and marketing costs

• Risk that required funding will not be raised

• Meaningful time, effort and attention required of senior management

IPOs can also be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.

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