Initial public offerings (IPOs)

Question 1

Initial public offering

Answer 1

a firm’s first issuance to securities to the public is an initial public offering.

Question 2

Going public

Answer 2

the process by which a closely held corporation issues new securities to the public is called going public .
When a firm goes public, it issues its stock on a new issue or initial public offering market.

Question 3

What are subsequent or secondary offerings ?

Answer 3

[Later issues] of stock by the same company.

Question 4

subsequent offering

Answer 4

the company offers additional shares which are

usually issued from the company’s treasury

Question 5

secondary offering

Answer 5

the company issues new stock for public sale

Question 6

Advantages of going public include

Answer 6

1) The ability to raise additional funds
2) The establishment of the firm’s value in the market
3) An increase in the liquidity of the firm’s stock

Question 7

Disadvantages of going public include

Answer 7

1) Costs of the reporting requirements of the SEC and other agencies
2) Access to the company’s operating data by competing firms
3) Access to net worth information of major shareholders
4) Limitations on self-dealing by corporate insiders, such as officers and major
shareholders
5) Pressure from outside shareholders for earnings growth
6) Stock prices that do not accurately reflect the true net worth of the company
7) Loss of control by management as ownership is diversified
8) Need for improved management control as operations expand
9) Increased shareholder servicing costs