Initial Public Offering is the process which a Private Limited Company applies to be listed on the stock exchange. Therefore, becoming a publicly traded corporation, with an initial offer of shares to the public for the first time of a percentage of the company. Usually undertaken by SME to raise cash for reasons such as future growth, repay debt, offer a wider range of services or enabling existing stockholders to sell their shares.
If the IPO Process is successful then it can lead to greater publicity of the company, whilst opening opportunities and possibly becoming a market leader. Once the process is complete the public company must ensure that it adheres to rules and regulations as it will be scrutinised by the public and government, formally becoming a PLC (Public Limited Company). With a set number of shares with shareholders and a market value. Not all IPOs are made available to individual investors, due to the large orders of shares need to raise the desired capital, therefore only being exclusively offered to large institutions.
If an IPO goes as planned, then it can be profitable and enable the company to grow in the expected route. Nonetheless, the IPO process involves numerous risks; therefore, it is essential that the right agencies and people get involved. First, the company needs to analyse whether or not an IPO is worth the time and potential risks involved. As not all companies are suited as a publicly traded plc. Hence why a numerous amount of time planning Pre-IPO is needed as the process timeline can range between 6 to 12 months, depending on a range of factors, which can prove to be costly.