IPO Full Form | Full Form of IPO
IPO Full Form - Initial Public Offering
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Initial Public Offering
- IPO stands for Initial Public Offering.
- It's a process by which a private company can go public. In IPO the company offers to sell its first stock to the public.
- Most frequently, the new or small companies offer IPO.
- At times, it might be an old company which decides to go public to be listed on the stock market of the country.
- IPO is typically offered by companies to get the capital to expand its business.
- The capital raised through IPO are often used to fund research, development, marketing programs and to pay off the debts.
- A company which matches public by offering its stock isn't obliged to repay the capital to investors.
- The company who offers to sell its stock is understood as an 'issuer' and it must hire an investment bank to offer IPO.
- After the IPO, its shares are traded within the open market which means the shares are sold by investors through secondary market trading.
- Only after a corporation offers its stock available through IPO, the general public can invest in it.
- You'll contact the owner of private company for investing in his company, but he's not obliged to sell you anything.
Eligibility Criteria to use for an IPO
- The company must have 400 or more shareholders who are holding 100 or more shares.
- There should be 1.10 million publically traded stocks.
- Share price at the time of listing should be a minimum of $4 per share.
- The market price of shares should be a minimum of 40 million.
- Aggregate profit before tax earnings of the last three should be $ 10 million, out of which the last two years pre-tax earnings shouldn't be but $ 2 million, and there shouldn't be lost in any of the last three years.
- Market capitalization must be a minimum of $ 550 million.
- Previous year revenue must be a minimum of $ 100 million.
Why Does a corporation Offer IPO ?
- It helps in raising the fund because a large no. of the general public will invest within the company by buying shares.
- It increases the corporate reputation, brand reputations, and market opportunity because more people will realize it.
- It helps in getting the loan with lesser interest costs.
- It increases the liquidity because any time shareholders can sell their shares, management/promoters also can easily sell their shares.
- It attracts employees also, and that they also will get motivated.