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===Advantages===
When a company listsbecomes itspublicly securities on a [[Stock exchange|public exchange]]listed, the money paid by the investing public for the newly issued shares goes directly to the company (primary offering) as well as to any early private investors who opt to sell all or a portion of their holdings (secondary offerings) as part of the larger IPO. An IPO, therefore, allows a company to tap into a wide pool of potential investors to provide itself with capital for future growth, repayment of the debt, or working capital. A company selling common shares is never required to repay the capital to its public investors. Those investors must endure the unpredictable nature of the open market to price and trade their shares. After the IPO, when shares are traded in the market, money passes between public investors. For early private investors who choose to sell shares as part of the IPO process, the IPO represents an opportunity to [[monetize]] their investment. After the IPO, once shares are traded in the open market, investors holding large blocks of shares can either sell those shares piecemeal in the open market or sell a large block of shares directly to the public, at a [[fixed price]], through a [[secondary market offering]]. This type of offering is not dilutive since no new shares are being created. Stock prices can change dramatically during a company's first days in the public market.<ref>{{cite news |last1=Jessica |first1=Matthews |title=How regular investors can access IPOs |url=https://fortune.com/2021/07/08/how-to-access-ipos-regular-investors/ |access-date=30 July 2021 |work=Forbes |date=8 July 2021}}</ref>
Once a company is listed, it is able to issue additional common shares in a number of different ways, one of which is the [[follow-on offering]]. This method provides capital for various corporate purposes through the issuance of equity (see [[stock dilution]]) without incurring any debt. This ability to quickly raise potentially large amounts of capital from the marketplace is a key reason many companies seek to go public.
* Loss of control and stronger [[principal–agent problem|agency problems]] due to new shareholders
* Increased risk of litigation, including private securities class actions and shareholder derivative actions<ref>{{cite journal|last1=Rose Selden|first1=Shannon|last2=Goodman|first2=Mark|title=The Shift in Litigation Risks When U.S. Companies Go Public|url=https://www.transactionadvisors.com/insights/shift-litigation-risks-when-us-companies-go-public|journal=Transaction Advisors|issn=2329-9134|access-date=16 January 2015|archive-date=6 November 2018|archive-url=https://web.archive.org/web/20181106192504/https://www.transactionadvisors.com/insights/shift-litigation-risks-when-us-companies-go-public|url-status=dead}}</ref>
'''Advantages and disadvantages of IPO'''
Just like every coin has two sides, IPO also has advantages and disadvantages for the company and investors.
'''1. Advantages of IPO for the company:'''
When a company lists its [https://moneymintidea.com/initial-public-offerings-ipos/ IPO] in the stock market, it helps the company in its development, expansion, capital expenditure, repayment of outstanding loans and raising large amounts of money.
When a company brings its IPO, it provides an exit route for promoters and old investors.
Company IPO is a cost-effective way of raising capital as companies do not have to pay interest on the money raised from the public, nor do they have to return the capital raised.
Public companies get easier access to finance than private companies. This is because public companies are required to maintain transparency in their business operations, which reduces the risk for lenders by having all the information available for verification.
IPO increases visibility and helps to build a brand image for the company.
IPO enhances the reputation of employees and builds their trust in the company. It helps to retain employees and attract new employees.
IPO enables correct valuation of the company.
IPO promotes discipline in management as the company is accountable to its shareholders for all its actions.
By going public, the company gets to know the view of outsiders. This helps them to plan their actions for better prospects.
2. Benefits of IPO to Investors
Zero cost investment, as there are no charges to apply for IPO, unlike buying shares on the secondary market, where you have to pay brokerage and regulatory fees.
Applying for IPO is simple, easy and hassle-free.
By applying for IPO, investors get an opportunity to participate in profitable and high-growth companies.
IPOs offer a chance to earn high profits quickly in case of premium listing or allow wealth creation in case of long-term investment.
Strict IPO norms make IPO markets more professional and secure.
The Red Herring Prospectus (RHP) issued for an IPO contains all the necessary information about the company to help investors make informed decisions.
In case of successful allotment, investors will become shareholders of the company. Shareholders can participate in certain corporate actions and elect members of the board of directors through voting rights.
3. Disadvantages of IPO for the Company
Preparing an IPO requires a lot of time from the company's promoters, management and employees.
Although IPOs are a low-cost way of raising capital, it can be expensive due to fees payable to intermediaries and fund managers.
IPOs may result in dilution of ownership among different shareholders which was previously limited to a few promoters and investors.
The company conducting the IPO is required to file regulatory documents on a regular basis along with the required disclosures. This increases the administrative cost for the company, as it has to hire a team to oversee and complete these tasks.
By going public, the company becomes accountable to its investors and hence must maintain a relationship with the investors and meet their expectations.
4. Disadvantages of IPO for Investors
Investors do not have any background information about the company conducting the IPO as it is a new company going public for the first time. The investor has to go through the entire RHP to know all the details of the company.
The investor may suffer losses if a discount listing is done with the goal of quick returns (listing gains).
There is no guarantee of allotment in an IPO in case of oversubscription.
==Procedure==
===Pricing===
A company planning an IPO typically appoints a lead manager, known as a [[bookrunner]], to help it arrive at an appropriate price at which the shares should be issuedoffered. There are two primary ways in which the price of an IPO can be determined. Either the company, with the help of its lead managers, fixes a price ("fixed price method"), or the price can be determined through analysis of confidential investor demand data compiled by the bookrunner ("[[book building]]").
Historically, many IPOs have been underpriced. The effect of underpricing an IPO is to generate additional interest in the stock and a rapid rise in share price when it first becomes publicly traded (known as an "IPO pop"). [[Flipping]], or quickly selling shares for a [[Profit (accounting)|profit]], can lead to significant gains for investors who were allocated shares of the IPO at the offering price. However, underpricing an IPO results in lost potential capital for the issuer. One extreme example is [[theglobe.com]] IPO which helped fuel the IPO "mania" of the late 1990s internet era. Underwritten by [[Bear Stearns]] on 13 November 1998, the IPO was priced at $9 per share. The share price quickly increased 1,000% on the opening day of trading, to a high of $97. Selling pressure from institutional flipping eventually drove the stock back down, and it closed the day at $63. Although the company did raise about $30 million from the offering, it is estimated that with the level of demand for the offering and the volume of trading that took place they might have left upwards of $200 million on the table.
==Largest IPOs==
{| class="wikitable sortable"
! rowspan=2|Company!! rowspan=2|Year of<br>IPO !! colspan=2|Amount (USD billions)
|-
! Company || Year of IPO || Amount ||Nominal!! Inflation <br>adjusted
|-
| [[Saudi Aramco]] || 2019 || $29.4B4<ref name=":0">{{Cite web|url=https://arab.news/pj8d2|title=Aramco's 'greenshoe option' pushes IPO to $29.4 billion|date=12 January 2020|website=Arab News|language=en|access-date=15 January 2020}}</ref>|| ${{Inflation|US|29.4|2019|fmt=c|r=2}} billion
|-
| [[Alibaba Group]] || 2014 || $25B25<ref>{{cite news |url=https://www.wsj.com/articles/alibaba-ipo-biggest-in-history-as-bankers-exercise-green-shoe-option-1411334271 |work=The New York Times |title=Alibaba IPO Biggest in History as Bankers Exercise 'Green Shoe' Option |date=18 September 2013 }}</ref> || ${{Inflation|US|25|2014|fmt=c|r=2}} billion
|-
| [[SoftBank Group]] || 2018 || $23.5B5<ref>{{cite news |url=http://fortune.com/2018/12/11/softbank-ipo-record/ |work=Fortune.com |title=Softbank Corp IPO Second Biggest in History|date=11 December 2018 }}</ref> || ${{Inflation|US|23.5|2018|fmt=c|r=2}} billion
|-
| [[Agricultural Bank of China]] || 2010 || $22.1B1<ref>{{cite news |url=https://www.bloomberg.com/news/2010-08-15/agricultural-bank-of-china-sets-ipo-record-with-22-1-billion-boosted-sale.html |work=Bloomberg |title=Agricultural Bank of China Sets IPO Record as Size Raised to $22.1 Billion |date=15 August 2010 }}</ref> || ${{Inflation|US|22.1|2010|fmt=c|r=2}} billion
|-
| [[Industrial and Commercial Bank of China]] || 2006 || $21.9B9<ref>{{cite news |url=https://www.bloomberg.com/news/2010-07-28/icbc-to-seek-as-much-as-6-6-billion-in-rights-offer-to-replenish-capital.html |work=Bloomberg |title=ICBC completed its record $21.9 billion IPO in October 2006 |date=28 July 2010 }}</ref> || ${{Inflation|US|21.9|2006|fmt=c|r=2}} billion
|-
| [[AIA Group|American International Assurance]] || 2010 || $20.5B5<ref>{{cite news |url=https://www.bloomberg.com/news/2010-10-29/aia-s-ipo-boosted-to-20-5-billion-with-overallotment-update1-.html |work=Bloomberg |title=AIA's IPO Boosted to $20.5 Billion With Overallotment |date=29 October 2010 }}</ref> || ${{Inflation|US|20.5|2010|fmt=c|r=2}} billion
|-
| [[Visa Inc.]] || 2008 || $19.7B7<ref name=wsjip>{{cite news |url=https://blogs.wsj.com/deals/2010/11/17/how-gms-ipo-stacks-up-against-the-biggest-ipos-on-record/ |newspaper=[[The Wall Street Journal]] |title=How GM's IPO Stacks Up Against the Biggest IPOs on Record |date=17 November 2010 |first=Stephen |last=Grocer }}</ref> || ${{Inflation|US|19.7|2008|fmt=c|r=2}} billion
|-
| [[General Motors]] || 2010 || $18.15B15<ref>{{citation |url=https://www.bloomberg.com/news/2010-11-26/gm-says-total-offering-size-23-1-billion-including-overallotment-options.html |work=Bloomberg |title=GM Says Total Offering Size $23.1 Billion Including Overallotment Options |date=26 November 2010 }}</ref> || ${{Inflation|US|18.15|2010|fmt=c|r=2}} billion
|-
| [[NTT Docomo]] || 1998 || $18.05B05<ref name=wsjip/> || ${{Inflation|US|18.05|1998|fmt=c|r=2}} billion
|-
| [[Enel]] || 1999 || $16.59B59<ref name=wsjip/> || ${{Inflation|US|16.59|1999|fmt=c|r=2}} billion
|-
| [[Meta Platforms|Facebook]]|| 2012 || $16.01B01<ref>{{citation|url=https://dealbook.nytimes.com/2012/05/17/facebook-raises-16-billion-in-i-p-o/ |newspaper= [[The New York Times]] |title=Facebook Raises $16 Billion in I.P.O.|date=17 May 2012|first1=Evelyn M.|last1=Rusli|first2=Peter|last2=Eavis}}</ref> || ${{Inflation|US|16.01|2012|fmt=c|r=2}} billion
|}
{| class="wikitable sortable"
|-
! Year || Stock exchange || Proceeds <br>(in bn USD)
|-
| 2009 || rowspan="3"| [[Hong Kong Stock Exchange]]<ref>{{cite news |url=http://www.ft.com/intl/cms/s/0/d9733718-2c4a-11e1-b7df-00144feabdc0.html |archive-url=https://ghostarchive.org/archive/20221210/http://www.ft.com/intl/cms/s/0/d9733718-2c4a-11e1-b7df-00144feabdc0.html |archive-date=10 December 2022 |url-access=subscription |title=China eclipses US as top IPO venue |newspaper=Financial Times |date=28 December 2011}}</ref> ||
| 2015<ref name="FT">{{Cite news|url=https://www.ft.com/content/ae9e6500-e69b-11e7-8b99-0191e45377ec |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/ae9e6500-e69b-11e7-8b99-0191e45377ec |archive-date=10 December 2022 |url-access=subscription|title=Global number of IPOs highest since financial crisis|newspaper=Financial Times|date=27 December 2017|last1=Bullock|first1=Nicole}}</ref> || rowspan="2"| [[Hong Kong Stock Exchange]] ||
|-
| 2016<ref name="FT" /> ||style="text-align:right"| 25.2
|-
| 2017<ref name="FT" /> || [[New York Stock Exchange]] ||style="text-align:right"| 29.4
|-
| 2018<ref>{{Cite web|url=https://www.scmp.com/business/companies/article/2179283/hong-kong-easily-regains-2018-global-ipo-crown-new-york-thanks|title=Hong Kong regains global IPO crown from New York in 2018 thanks to its listing reforms|date=24 December 2018}}</ref> || rowspan="2"| [[Hong Kong Stock Exchange]] ||style="text-align:right"| 31.2
|-
| 2019<ref>{{Cite web|title=Hong Kong Ranks Top in Global IPO Markets for 2019|url=https://www.caixinglobal.com/2019-12-18/hong-kong-ranks-top-in-global-ipo-markets-for-2019-101495294.html|access-date=2021-11-26|website=[[Caixin]]|language=en}}</ref> ||style="text-align:right"| 40.4
|-
| 2020<ref>{{Cite web|url=http://www.xinhuanet.com/english/2021-01/13/c_139664764.htm#:~:text=The%20report%20said%20Nasdaq%20topped,listed%20in%20HKEX%20to%202%2C538.|title=Hong Kong ranks as 2nd largest IPO market in 2020|date=13 January 2021}}</ref> || rowspan="2"| [[Nasdaq]] ||style="text-align:right"| 57.8
|-
| 2021<ref>{{Cite web|url=https://home.kpmg/content/dam/kpmg/cn/pdf/en/2021/12/china-hk-ipo-2021-review-and-outlook-for-2022.pdf|title=Mainland China and Hong Kong IPO markets - 2021 review and 2022 outlook |accessdate= 26 December 2021}}</ref> ||style="text-align:right"| 100.6
|-
| 2022<ref>{{Cite web|url=https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2023/03/china-hk-ipo-2023-q1-review.pdf |title= Chinese Mainland and Hong Kong IPO markets 2023 Q1 review |accessdate= 24 June 2023}}</ref> || rowspan="2"| [[Shanghai Stock Exchange]] ||style="text-align:right"| 56.5
|-
| 2023<ref>{{Cite web|url= https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2024/01/china-hk-ipo-markets-2023-review-and-2024-outlook.pdf |title= Chinese Mainland and Hong Kong IPO markets 2023 and 2024 outlook |accessdate= 29 January 2024}}</ref> ||style="text-align:right"| 31.3
|-
| 2024 mid-yearQ3<ref>{{Cite web|url=https://assets.kpmg.com/content/dam/kpmg/cn/pdf/en/2024/0610/china-hk-ipo-2024-mid-yearq3-review.pdf |title= Chinese Mainland and Hong Kong IPO marketsMarkets: 2024 mid-yearQ3 review |accessdate= 2913 JuneOctober 2024}}</ref> || rowspan="21"| [[New York Stock ExchangeNasdaq]] ||style="text-align:right"| 1014.84
|}
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