Initial Public Offer

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

A company can participate in an IPO due to various benefits associated with the issue. The company should issue a prospectus which is legally an invitation to investors to make offers for shares.

Strengths of the Initial Public Offer

1. The company can get enough publicity because the shares are sold to the general public. This publicity may create goodwill and raise the share prices.

2. Only financially sound companies can sell shares directly to the general public so the shareholders are confident that their investments are safe and they will get higher dividends.

3. The company can sell its shares at a premium so more funds are generated. The shareholders can also sell these shares at high prices in the future and make capital gains.

Strengths of Merger

1. Maximising Profits. When two or more companies selling the same products but different prices come together they reduce the competition thus controlling the market, hence setting prices which guarantee profit maximization

3. Economies of scale. Different companies are able to combine their comparative advantage, thus enjoying reduced costs of production.

Strength of acquisition

1. There is low cash requirement for an entity acquiring another company.

2. A private entity acquiring another firm has advantage of expansion due to increased business activities.

IPO will be the better option for the private company since it will attract large number of investors and will gain from large capital injection.

Tagged In :

Get help with your homework

Haven't found the Essay You Want? Get your custom essay sample For Only $13.90/page

Sarah from CollectifbdpHi there, would you like to get such a paper? How about receiving a customized one?

Check it out