Forced Initial Public Offering - IPO
Categories: IPO, Incorporation, Board of Directors
There are pluses and minuses to being a public company. If your stock is available on public exchanges, it's easier to raise money. Need cash? Just sell some stock.
On the downside, a public company faces increased regulatory scrutiny. Also, public companies must release certain financial information on a regular basis (quarterly earnings reports, etc.). These disclosures give competitors an idea of what's going on in the company.
In general, it's up to a company whether it wants to become a public company or not. However, government regulators have rules that can force a company to disclose financial information publicly. These provisions kick in when a company gets big enough and has enough shareholders.
The rules don't necessarily force the company to sell its stock on the public market. But a company that meets the conditions might as well do so. Once it reaches that stage, it has all the reporting requirements, with none of the access to public markets.
That situation represents a forced IPO (an IPO, or initial public offering, is the process by which a company first sells its shares to the public). The SEC, as the main regulator of U.S. markets, says that when a company gets big enough and has enough shareholders, it must report information to the public.
You launch a computer startup in your garage. You are the sole shareholder (of all the computer parts strewn around the lawn mower). You don't have to answer to anyone...all your financial information is kept between you and the IRS.
You start to grow as a company, adding shareholders as you go. Eventually, you have assets of over $10 million and more than 500 shareholders. The SEC sends you a letter: you're going to have to start disclosing your financial info. You decide you might as well launch an initial public offering. A forced IPO.
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Finance: What is an IPO?25 Views
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do with an ipo Auras Normal humans pronounce it if
both well actually most people just spell it out I
po It stands for initial public offering In the three
words tell the story and i pl refers to a
company who's raising money by selling shares of itself to
the public for the first time a maiden voyage in
public funding if you will Whatever dot com has forty
million shares outstanding after three private rounds with venture capitalists
and private investors it wants to raise money to go
big internationally And for the first time it will offer
shares to joe and jill public And that means that
all of it shares will be tradable publicly on the
open market like on nasdaq or the new york stock
exchange That is the insiders early investors founders et cetera
will be able to just call their broker at schwab
or fidelity or wherever and sell their shares get liquid
and buy themselves a maserati because it's not what everyone
does after a nice meal So whatever dot com sells
ten million shares a twelve bucks each to raise one
hundred twenty million dollars which they can spend to build
out offices all over the world So yeah that's an
ai po and that's Why a company generally wants to
make shares available to the public because once you've made
an initial public offering and you make money off the
sales of your stock you khun by as many hippos
as you like and just remember to feed them three
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