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Strategic Corporate Finance. All about IPOs - Essay Example
Author : williamsonfatim
Finance & Accounting
Pages 4 (1004 words)
An IPO for Avaya Introduction In the corporate world, there are a number of ways of raising capital or funding for a business. When a business is starting, one of the options is to go to a venture capitalist with your business idea and explain to them how it is going to work…
Another option is to raise capital from the public. A corporation is a legal entity separate from the lives of its owners and if conditions are favorable, it can raise capital through an Initial Public Offering (IPO) in the equity market or alternatively through issuing bonds in the debt market. Obviously the public response would depend on the viability of the company, its future prospects and line of business, as well as the reputation and business acumen of its management. Types of IPOs, Advantages & Risks Generally speaking, at the present time there are two options as to how an IPO can be made. The first, as indicated above, is to make a public offering so that all interested investors can read the prospectus and apply for the shares through the stock market. However nowadays things are a little bit more complicated as the IPO is usually conducted by investment banking firms in return for commissions and fees. One of them acts as an underwriter, guaranteeing to take up all shares not applied for. This helps the company raise the required capital regardless of the amount of public response. An underwriting fee is charged as per agreement made with the IPO company. ...
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