An initial public offering (IPO) occurs when a security is sold to the general public for the first time with the expectation that a liquid market will develop. Although an IPO can be of any debt or equity security most companies start out by raising equity capital from a small number of investors, with no liquid market existing if these investors wish to sell their stock.
If a company prospers and needs additional equity capital, at some point the firm generally finds it desirable to "go public" by selling stock to a large number of diversified investors. Once the stock is publicly traded, this enhanced liquidity allows the company to raise capital on more favorable terms than if it had to compensate the investors for the lack of liquidity associated with a privately-held company. Existing shareholders can sell their shares in open-market transactions.
Thanks,
Muhammad Anas
Business Consultant
muhammad.anas@adamadvisors.com
+971 50 70 45 733
2A, Building 6 | Gold & Diamond Park
PO Box 183827 | Dubai | United Arab Emirates
Switchboard: +971 4 341 9701 | Extension 150 Website: www.adamadvisors.com
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