respect to offerees or how many securities it may sell. The funds received from the securities sold in an IPO may be used for common company purposes, such as working capital, research and development, retiring existing indebtedness and acquiring other companies or businesses.
Going public creates a public market for a company’s securities. Liquidity is important for existing and future investors, and provides an exit strategy for venture and hedge fund investors.
Following an IPO, a company should have greater access to capital in the future. Once a public market is created, a company may be able to use its equity in lieu of cash or more costly debt financings.
Public companies have greater visibility. The media has greater economic incentive to cover a public company than a private company because of the number of investors seeking information about their investment.