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Initial public offering |
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Initial public offeringThe first offering of a company's shares to the public known in the UK as a flotation. IPO was originally an American term but is increasingly being used across all world markets The shares offered may be existing ones held privately, or the company may issue new shares to offer to the public.There can be lots of reasons why companies offer shares to the public:the directors want to raise new capital for the companythe directors want to widen the shareholder base of the companythe shareholders want to have a liquid market in which to trade their sharesthe directors want to be able to use 'paper' to make acquisitionsthe directors want the publicity that a public listing bringsIn recent years there has been a tendency for companies to list on the market by a private placing of shares to institutions rather than public offerings. This is partly because the costs of a placing are far lower than an offer for sale, and partly it is because in 1996 the Stock Exchange scrapped its rule requiring that new issues worth more than £50m should offer a proportion to the public.Whatever the reason, it rankles that members of the public are so often denied the chance to 'get in on the ground floor' while institutions clean up. The internet may reverse the trend, however. There have already been several online flotations in the USA and Europe in which private investors get full participation rights. These are sometimes referred to as EPOs (Electronic Public Offerings).One of the advantages of buying shares in IPOs is that they do not attract Stamp Duty (0.5% tax normally paid on share purchases) and since you can buy direct from the issuing company you can avoid broker's commission.Similar MatchesOffering statementOffering statementA shortened registration statement required by the Securities and Exchange Commission on debt issues with less than a nine-month maturity. Public offeringPublic offeringAn offering of new securities to the public. Competitive offeringCompetitive offeringAn offering of securities through competitive bidding. Rights offeringRights offeringIssuance to shareholders that allows them to purchase additional shares, usually at a discount to market price. Holdings of shareholders who do not exercise rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed-end funds, which cannot otherwise issue additional common stock. Rights OfferingRights OfferingA popular means of raising capital by offering shareholders the opportunity to buy additional shares of the same stock at a price below the current market value. Further SuggestionsSecondary distribution or offeringelectronic public offering Registered secondary offering rights offering Split offering Offerings Reoffering yield Secondary Offering Offering memorandum Underwritten offering Intrastate offering Public securities offering Dual syndicate equity offering Public offering Public offering price Blank check offering Offering date Offering scale Targeted registered offerings Shelf offering |
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