The concept of going public, which is the opposite of going private, involves all of the processes which function to allow a company to sell and issue its shares to prospective investors. The shares which are made available for purchase are known collectively as the initial public offering, or IPO.
One of the first things a company needs to do before it goes public is to coordinate with an investment bank in order to decide on share price, as well as the number of shares which will be made available for public purchase. These factors are particularly important because these will help determine how well the company will perform in the future. For instance, the number of shares made available will definitely determine how much percentage of ownership still maintained by the company’s actual owners. At the same time, it will also dictate how much the company can earn from the sale of its shares. The investment bank makes a profit from this partnership because it buys the shares from the company and then takes charge of selling these to the public at profit.
Companies may decide to go public because this is a way of growing the company. Investors bring in fresh capital which the company can use for maintaining smooth operations, the acquisition of new assets, and improvement of current processes. All of these contribute to better performance for the company, which in turn attracts more investors. Ideally, this would set the cycle off again and help the stock price improve, bringing in a good flow of capital and allowing further growth.
