Banks help companies with their initial public offering or IPO. That's called going public. But why do companies go public in the first place? Well, there are a number of pros and cons to this decision. Firstly, it provides capital for growth. As the company sells those shares to the general public, the general public then give cash in return, and that cash can be used for growth. It also provides liquidity for existing shareholders. Liquidity means those shareholders can quickly and easily sell their shares without a loss of value. When the company was privately held, it's very difficult to sell shares. Now the company's publicly owned, it's much easier to sell your shares. There's also easier use of stock options. If employees want to get involved as shareholders, part of their compensation package could be to get stock options. Stock options encourage the employees to feel involved in the company. Maybe they're gonna work harder. Maybe they'll stay longer with the company. In addition, it ensures access to further equity funding in the future if the company wants future capital and growth. And it builds the corporate brand. The company now looks bigger. There's more people involved. More people are reviewing the performance of the company. All of this outside interest will mean the company will be in the newspapers more often as well. These shares also give a company a currency, those shares for acquisitions. If company A wanted to buy company B, company A could offer B's shareholders some shares in A. So they don't have to pay in cash. They can just pay in shares. However, there are a number of cons to an IPO. It consumes fast amounts of time, resources, and cash. It's very expensive doing an IPO. An awful lot of people, particularly senior management, will be involved in the IPO, and it's a big distraction from their day-to-day running of the business. It also increases external insights. Lots of outsiders now have to have access to lots of internal information, particularly financial statements and the details surrounding them. They're now gonna be publicly available. You need to fulfill requirements made by the stock exchange. Companies usually have to be a certain size financially, and they have to have a certain length of trading history. You usually can't just be a startup and get yourself onto a stock exchange. There's also higher reporting requirements, and those requirements take up a lot of time and resource. We now need to employ people just to be reporting out to the stock exchange. Directors and officers have increased liability, and the execution of the IPO itself, the success of the IPO, well, it's actually exposed to market conditions. What if there's a bit of a recession? Financial markets aren't feeling too good. Unfortunately, the IPO might fall over. It might not raise as much money as expected.
