Initial public offering
An initial public offering (IPO) is a company's first sale of stock to the public.
Discuss this article on the Initial public offering board.
Typically, an IPO involves the stock from a young and oftentimes little-known, if not obscure, company. But occasionally, well-known and well-established firms do "go public." Companies go public in order to raise money. In so doing, the company helps itself: it increases its financial base, liquidity, prestige, and ability to attract management and make acquisitions. Or, it could be that an established company is spinning off subsidiaries to "unlock hidden value."
In unlocking hidden value, companies go public or do a partial spinoff of a subsidiary to establish fair market value for the asset. Fair market value is useful in a variety of tax and tax planning issues. The value established in public trading may also increase the value of share to investors increasing the value of future stock offerings. Finally, in small start-ups, employees and investors are often rewarded with restricted shares of stock. The IPO allows early investors to take profits and diversify their holdings.
Some companies, on the other hand, choose to stay private so they don't have to share profits, be accountable to shareholders, relinquish control, manage quarterly sales/earnings, worry about keeping stock prices high, or disclose company secrets.
Related Fool Articles
Related Community Blogs
- Go public
- Private company
- Public corporation
- Secondary offering
- Take private
Recent Mentions on Fool.com
- Will New City Bans Halt the Growth of the E-Cigarette Market in America?
- The FDA has Banned Bidis, Will a Menthol Ban Follow?
- This $73 Billion Hedge Fund Company Has Been Buying Ford, GE, and Pitney Bowes
- 3 Things to Know About Omeros Corporation
- Dividend Growth Investors Should Consider Seadrill Partners