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When companies are in need of raising capital, they often decide to sell shares through initial public offerings (IPO). Also referred to as an "offering" or "flotation," an IPO allows a company to gain the capital they need by selling stock to the public for the first time. The money gained through an IPO can be used by the company for future expansion, debt repayment, or simply as working capital.
IPOs have several advantages. They enable easy and cheap access to capital for the company. They also improve the public image of the company while retaining better management and employees through equity participation. Companies that use IPOs are able to list additional stock shares during a second offering, which provides another opportunity to raise capital. And, IPOs allow companies to raise capital without incurring further debt.
IPOs do have a few disadvantages, however. Companies that list IPOs must disclose significant financial and business information, which can be useful to competitors. Also, IPOs require time and effort on the part of senior management.
Head to Business.com if you are interested in learning more about initial public offerings (IPO). By clicking the links on the left, you can learn everything you need to know about how IPOs work and whether an IPO is right for your company.