When a company wants capital for growth, it may plan for an Initial Public Offering, popularly known as an IPO. When a company first goes public, its first issue of shares to the public is called an Initial Public Offering (IPO).
In an IPO, a company offers shares in the company to raise capital in the larger public market. The key benefit of an IPO is that it could raise a substantial amount of capital and, at the same time, may create publicity for the issuing company.
While the IPO provides a source of new capital, establishing the company’s value in the market and increasing its stock’s liquidity, going public can be both expensive and time-consuming. There are flotation costs such as filing fees, attorneys’ and accountants’ fees, and the underwriting fees to be paid. In addition, the costs of complying with the regulatory requirements for the IPO and continued reporting after issuance may be burdensome to the company.