Why Limit IPO?

Before we tackle why directors and officers limits IPO, let's first assess what an IPO is. An IPO or initial public offering is the first stock sale by a business made for the public. A business can increase revenues by issuing either an equity or debt. If the business has never given equity to society, this is referred to as an IPO. An initial public offering is also referred to as going public due to the fact that most public businesses approve the purchasing and trading of shares on the stock market unlike that of private companies wherein shares are made unavailable to the public. Although private company owners can be approached with regards to investments, the company is authorized to turn down the offer.

Public businesses have hundreds and even thousands of stockholders and are subjected to austere regulations and policies. There are various advantages of going public with your business. One significant benefit of going public or implementing IPOs is it can raise a greater amount of revenues for your business. Furthermore, being traded and bought publicly can open a lot of financial opportunities. Due to the higher scrutiny, public businesses will usually obtain higher rates when they file debts. Another is that as long as the market demand is present, the public business can continuously issue for more stock thereby possessions and mergers are more convenient to do since the stocks can be filed as part of the transaction. Another financial opportunity that arises from an IPO business is stock trading in the open market will spell out liquidity. This will allow the business to open up new systems such as employment stock ownership plans that may help attract more talented employees onto your business. However, most public businesses still limit their IPOs despite these benefits that may greatly change their business and propel it onto its optimum state. Why is that?

Directors and officers limit IPO due to certain disadvantages that also come with going public or floating. One main disadvantage of IPO is improved disclosure. When a business goes from being privately owned to publicly owned, the number of individuals who gain access to financial records are greatly increased. The management income and benefits are all exposed, which at some points, may even make it on the newspaper.

Another disadvantage of IPO is the cost. They aren't inexpensive. Aside from the steep initial cost of getting an IPO, there are also expenses for maintenance of the quote on the stock market.