Question

In a paragraph What is the purpose of an initial public offering (IPO)? How does an investment bank facilitate the process? List and describe several recent IPOs. Discuss the advantages and disadvantages of an IPO.

Answer 1

Initial public offer is offered by company which has been private in nature and which has not been listed upon the stock exchange so those company will be offering their equity shares into the market in order to generate funds for the first time. Initial public offering is done in order to raise funds which can be used for discharging of debt or some other specific purpose. Investment bank will be facilitating in initial public offering by being an underwriter to the initial public offering and charging a commission from the company and it will be helping in determining the price of the initial public offering and facilitating the issuance of the shares in the market. Recent ipos will be including initial public offering of Lyft and Uber and Spotify and they have underperformed the Expectations as they have provided lower rate of return to the investors. Advantages of initial public offering will be including that it is helping the company in order to generate the money and it will also be helping the company in order to maintain a high level of transparency and an expansion opportunity also . Disadvantages for initial public offering will be that the company will be having a lot of regulations to follow and it will be complying with the disclosure policies and the public documents and it can be costly also when the company will be underpriced in the market.