Going public refers to a private company\'s initial public offering (IPO) which
ID: 359065 • Letter: G
Question
Going public refers to a private company's initial public offering (IPO) which can be alternative forms of funding. Go online and find at least two (2) companies that are making public their plans to have an IPO. Prepare a research outline about the IPO process and answer the following questions.
What do you think about the number and percentage of companies going public?
What are the advantages and disadvantages for a company going public?
Are IPOs available to sell immediately upon trading or is there a time limit that must pass before sales are accepted?
Explanation / Answer
Going public refers to a private company's initial public offering (IPO) which can be alternative forms of funding.
Go online and find at least two (2) companies that are making public their plans to have an IPO.
As per the recent rounds of new, there ar multiple companies panning for an IPO such as Airbnb, Beijing-based Jianpu Technology Inc, Austin-based SailPoint Technologies Holdings, Inc, The Wisynco Group, Tech firm RAZER, Qudian an online Chinese micro-lending company etc.
Prepare a research outline about the IPO process and answer the following questions.
The general IPO process followed by an firm which plans to go public and raise funds are as follows.
Although the formal process is mentioned below, the firm always starts preparations month in advance informally by auditing and cleaning its books, setting up a great management team, freezing its’ capital requirements based on the growth plans etc.
What do you think about the number and percentage of companies going public?
A rough estimate is about 4500 companies are publicly traded in US stock exchanges. The number has been going down in the past decade. This is attributed to a number of reasons such as new businesses are asset light and thus require less capital for expansion, increasing fees of investment bankers, restrictions in decision making due to multiple stakeholders which is last need thing in this rapidly changing business environment, increased times and energy spent on regulatory compliances etc.
What are the advantages and disadvantages for a company going public?
Advantages:
Greater access to capital at a lower cost (the most important advantage)
Disadvantages:
Are IPOs available to sell immediately upon trading or is there a time limit that must pass before sales are accepted?
General public can sell their shares immediately upon trading but other investor categories such as Qualified institutional buyers, employees category etc might have restrictions (and they generally have restrictions) of a lock-up period only after which they can sell in the open market.
In addition to time period, there can be restrictions on the volume of shares that can be offloaded in the market based on regulatory rules for the investor category (for general public practically no such restrictions exist).
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