Initial public offering is the process by which a private company can go public by sale of its stocks to general public. It could be a new, young company or an old company which decides to be listed on an exchange and hence goes public.
Companies can raise equity capital with the help of an IPO by issuing new shares to the public or the existing shareholders can sell their shares to the public without raising any fresh capital.
Going public raises a great deal of money for the company in order for it to grow and expand. Private companies have many options to raise capital – such as borrowing, finding additional private investors, or by being acquired by another company. But, by far, the IPO option raises the largest sums of money for the company and its early investors.
Some of the largest IPO’s to date are:
Alibaba Group (BABA) in 2014 raising $25 billion
American Insurance Group (AIG) in 2006 raising $20.5 billion
VISA (V) in 2008 raising $19.7 billion
General Motors (GM) in 2010 raising $18.15 billion
Facebook (FB) in 2012 raising $16.01 billion.
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