If you DK what an IPO is, let us explain it to you RN, because TBH it’s super simple.
It feels like every big biz these days is talking about its “IPO”, and if you don’t know what that means, let us explain it to you RN.
IPO stands for Initial Public Offering. Essentially, it is when private companies offer shares in their company to the public. They do this by listing on a stock exchange so public investors can purchase shares.
This is a huge step for a company, and they’ll only make the leap once they’re ready to cop the ‘public’ heat. Yep, private companies that go public need to deal with intense public scrutiny, a tonne of paperwork and regulators, which means they need to have enough resources to support them through the process.
Companies hire what’s called an “underwriter”, which is usually an investment bank, to set the IPO price (i.e. how much the company’s shares will be worth the day the company lists on a stock exchange).
These people will also manage the IPO process (think: marketing the IPO, setting meetings with potential investors and selling the dream).
Once the underwriters are ready to go, they’ll pick a date to list the company on a stock exchange.
Then, the public is free to invest in the stock just like they would with any other public stock.
Recent examples of companies that have gone public in Australia are Airtasker and Adore Beauty. Globally, we’ve seen Deliveroo go public in the London Stock Exchange and Robinhood went public on the NASDAQ.
Rather than knock on the doors of private investors, IPOs are a great way for companies to raise money from the public.
Companies can then use this cash to build out their business even more! It’s also awesome for publicity, and there’s a lil bit of status that comes with being a publicly-listed company.
But IPOs are also a way for early investors in a company - aka the angels who helped get the company off the ground - to cash out and use that money to invest in new ventures.
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