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IPO

initial public offering (IPO) or stock market launch first sale of stock by a company to the public used by either small or large companies to raise expansion capital and become publicly traded enterprises An IPO allows a company to tap a wide pool of investors to provide itself with capital for future growth, repayment of debt or working capital

ADVANTAGES OF BEING AN IPO


Bolstering and diversifying equity base Enabling cheaper access to capital Exposure, prestige and public image Attracting and retaining better management and employees through liquid equity participation Facilitating acquisitions Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.

DISADVANTAGSE OF BEING AN IPO


Significant legal, accounting and marketing costs Ongoing requirement to disclose financial and business information Meaningful time, effort and attention required of senior management Risk that required funding will not be raised Public dissemination of information which may be useful to competitors, suppliers and customers

Common methods of an IPO


Best efforts contract Firm commitment contract All-or-none contract Bought deal Dutch auction

Rights issue
issue of additional shares by a company to raise seasoned equity offering. special form of shelf offering or shelf registration existing shareholders have the privilege to buy a specified number of new shares from the firm at a specified price within a specified time. shares are issued to the general public through market exchanges.

Considerations
Issue rights the financial manager has to consider: Engaging a Dealer-Manager or Broker Dealer to manage the Offering processes Selling Group and broker dealer participation Subscription price per new share Number of new shares to be sold The value of rights vs. trading price of the subscription rights The effect of rights on the value of the current share The effect of rights to shareholders of record and new shareholders and rightsholders

Private placement
funding round of securities which are sold without an initial public offering, usually to a small number of chosen private investors. Most private placements are offered under the Rules known as Regulation D. Private placements may typically consist of stocks, shares of common stock or preferred stock or other forms of membership interests, warrants or promissory notes (including convertible promissory notes), bonds, and purchasers are often institutional investors such as banks, insurance companies or pension funds. direct sale of securities to a small number of investors. These investors are financial institutions , Banks and HNI. it saves time and cost.