An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. The transition from a private to a public company can be an important time for private investors to fully realize gains from their investment as it typically includes share premiums for current private investors. Meanwhile, it also allows public investors to participate in the offering.
When a company offers its shares for public purchase, it aims to raise more capital and equity from interested investors. This is certainly beneficial for both parties, because investors will also benefit from the shares they invest.
According to The Balance, the company that announced the IPO earlier was a private company. When the company is big enough, it will be able to offer its shares to public investors for the first time. Typically, this occurs when the company has reached a value of 1 billion US dollars.
However, companies with a lower valuation can offer shares. This decision depends on the company’s policy holders with market competition competition. By announcing the IPO, the company will be able to grow rapidly and ensure its sustainability. Investopedia says that when a company announces an IPO and goes public, shares held privately go public.
In this way, the shares of the private shareholders have value in the market. The type of company has also changed from a closed PT to a public company (Tbk). The more companies that open their shares to the public, we can conclude that economic conditions tend to be positive. The reason is, during a recession, the number of IPOs decreased. When the economy improves, the IPO numbers usually grow back.