Find out what a company's IPO means, how they work in the financial market and how to profit from this transaction.
O stock market brings with it a very broad and even somewhat complex vocabulary for people who have never studied this subject. One of the concepts that few beginners know about is the IPO and why companies opt for this strategy.
Initial Public Offerings (IPOs) represent a crucial milestone in a company's journey, marking the moment when it becomes accessible to the investing public.
These operations not only provide the company with a vital source of capital to finance its growth and expansion, but also offer investors the opportunity to become an integral part of the company's future success right from the start.
The acronym IPO - "Initial Public Offering" has become very well known in recent years due to the significant increase in the number of investors on the Brazilian Stock Exchange.
For novice investors, this term is common when reading financial content: "Company X does IPO and raises 1 Billion Reais"; "Company Y's IPO is postponed due to the Covid-19 health crisis". But what is an IPO? Why do companies decide to go public on the stock exchange?
Is it worth going for an IPO? Valor & Capital has compiled the main information on this subject in a clear and objective way and brought it to you! Check it out below and have a good read!
IPO - (Initial Public Offering).
Above all, the Initial Public Offering is an event that determines the start of a company on the stock market, i.e. when a company opens its capital for new investors to become partners.
By becoming a publicly traded company, the company makes a piece of its business available through shares (the famous papers), which are traded on the stock exchange. Stock Exchange B3.
It's quite common to see that the companies that make this decision are quite solid and are at a certain level of maturity in their business, but with very high growth possibilities.
Why do companies do IPOs?
Before we get into that, we need to understand that the IPO process is not so simple and can be relatively expensive. It takes companies an average of a year or more to "get their house in order" to go public.
They undergo external scrutiny and have to fulfil a series of tax, financial, corporate governance and corporate structure requirements, among others, until they are in compliance with the competent bodies in order to register and be listed on the stock exchange.
If the process is as complex as it seems, why do companies still decide to go public?
We have listed two reasons that we consider to be the main ones for a company:
1. Fundraising
Considered the main reason for going public, raising funds on the market is undoubtedly what most attracts companies to make this decision. Making new acquisitions, internationalising, investing in new products and services, improving processes and hiring are just some of the possibilities that companies see when they go public on the stock exchange.
2. Image
A company's reputation is undoubtedly one of the biggest challenges for any business. Maintaining your image and credibility in digital times has become necessary in order to achieve lasting and healthy results in the long term.
In this way, going public brings with it a great deal of responsibility in terms of the company's results and operations, since it needs to maintain direct contact with its shareholders and investors.
The market can look favourably on this, since a listed company has a much higher degree of transparency and corporate governance than its unlisted competitors. Media recognition and visibility will become more frequent in line with the actions and strategies adopted by the company.
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