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What Are the Advantages and Disadvantages for a Company Going Public

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What are the advantages and disadvantages for a company going public? An initial public offering (IPO) is the first sale of stock by a company. Small companies looking to further the growth of their company often use an IPO as a way to generate the capital needed to expand. Although further expansion is a benefit to the company, there are both advantages and disadvantages that arise when a company goes public. There are many advantages for a company going public. As said earlier, the financial benefit in the form of raising capital is the most distinct advantage. Capital can be used to fund research and development, fund capital expenditure or even used to pay off existing debt. Another advantage is an increased public awareness of …show more content…

(For more information, check out ourIPO Tutorial and The Murky Waters Of The IPO Market.) If you 're lucky enough to have a good relationship with your broker, you may be able to purchase oversubscribed new issues before other clients. These tend to appreciate considerably in price as soon as they become available on the market: because demand for these issues is higher than supply, the price of oversubscribed IPOs tends to increase until supply and demand come into equilibrium. If you 're an investor who doesn 't get the first right to buy new issues, there 's still an opportunity to make money, but it involves doing a substantial amount of work analyzing the issuing companies. Here are some points that should be evaluated when looking at a new issue: 1. Why has the company elected to go public? 2. What will the company be doing with the money raised in the IPO? 3. What is the competitive landscape in the market for the business 's products or services? What is the company 's position in this landscape? 4. What are the company 's growth prospects? 5. What level of profitability does the company expect to achieve? 6. What is the management like? Do the people involved have previous experience running a publicly-traded company? Do they have a history of success in business ventures? Do they have sufficient business experience and qualifications to run the

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