Why an IPO?
An initial public offering (IPO) of stocks is a share offering to the public by a small or medium-sized enterprise (SME) undertaken to raise additional cash for future growth or to enable existing stockholders to cash out by selling part of their holdings. Among other things, a successful IPO will provide a company with an objective valuation of its stock, create a good public image of the company—thus lowering its cost of borrowing—and provide it with a pool of publicly owned shares for future acquisitions of other companies. However, there are also drawbacks to being a public company, such as loss of freedom (including costly disclosure requirements and close monitoring by the public and government) and, if a takeover is threatened, potential loss of control.
