If preparing to participate in the stock market, many new investors will be confused with the concept of what is IPO or what does IPO stock means? While IPO is considered one of the desirable events of companies/enterprises just starting to list their shares on stock exchanges.
For everyone to understand more about IPO, the following article of Kienthuccoin will introduce you to the information you need to know as well as the definition of the most specific IPO:
What is IPO?
What is IPO? IPO – English is Initial Public Offering, which means “Initial Public Offering.” The term IPO refers to a company, a business that raises money widely from the public for the first time through the initial issue of shares and listing them on the stock exchange. The public is a collection of potential investors with a sufficiently large value of securities offered for sale. After the initial public offering, joint-stock companies will officially become public companies, also known as a public joint-stock companies.
What is the purpose of Initial Public Offering – IPO?
The need to increase capital for companies and businesses is always a priority job because, thanks to that, the company can expand its scope of activities and develop accelerate revenue growth more effectively. Issuing and listing shares on the stock market for companies is the best way to increase capital and create many financial opportunities. This form of equitization also helps employees – who accompany the company to own a certain amount of shares from the company.
To understand the purpose of the activity What is IPO, please refer to the following shares:
- We affirm the company’s resources and position in front of the public, contributing to increasing value & positioning the brand and reputation.
- I am helping to raise a large amount of capital from many investors in the community through the sale of shares to expand the scale of operations.
- IPO Process – Initial public offering carries more value than issuing corporate bonds.
- The IPO process is seen as a stepping stone for potential mergers and acquisitions of small businesses.
- Equitization activities attract potential human resources, building a team of highly specialized staff.
What are the conditions for companies to conduct IPOs?
To help new businesses in the market understand what the conditions for an IPO are, please refer to the following specific standards:
- The company must have a charter capital in all accounting records. At the time of registration for IPO, procedures are from VND 30 billion or more.
- There must be a specific plan for implementation of IPO, the use of capital raised after the IPO is approved by the Board of Directors and committed to responsibility.
- Business activities in the most recent year up to registration to issue shares must be profitable.
- Enterprises in the field of infrastructure must have at least one infrastructure construction investment project under the socio-economic development project of a ministry or branch, have a project approved by a competent authority, and be organized by a competent authority: finance, securities underwriting.
- Enterprises with 100% state capital must transform into a joint-stock companies.
- Enterprises with foreign-owned capital must register for conversion into a joint-stock company and set up an IPO registration dossier through the advice of a securities company.
What are the methods of IPO offering?
Based on the securities law, the form of IPO – initial public offering of shares is allowed through the following:
- Methods miss media, including newspapers, radio, television, Internet, etc.
- Dutch auction (descending auction): is a form of the auction when an item is offered for sale for a very high price, even much higher than the actual value. This price will slowly decrease until one of the bidders accepts the current price.
- Buy wholesale and resell Offer.
- Guarantee Commitment
- Service with the highest responsibility
The legal procedures for companies to participate in IPOs are very complicated, with strict and complicated sanctions. Therefore, each IPO deal often needs different businesses to support it. Specifically, in the United States, Law firms/securities companies/auditing firms will support.
Risks when deploying IPO – initial public offering of shares
- Increased costs incurred, including issuance fees, consulting, intermediaries, accountants, investment banks, etc.
- The transparency of information in a way maximum makes it difficult for companies and businesses to control all information released to the public and the consequences on the value of information.
- Sharing and gradually losing control of the company’s operations, the enterprise must pass a shareholder vote.
- The pressure to maintain the growth of enterprises will increase due to investment from the market and shareholders.
- The board of directors and corporate executives must bear many responsibilities for laws, regulations, public reporting, etc.
In general, IPO is seen as a complicated financial process but brings many benefits. . The value that IPO brings not only within the business but also with investors in the market. IPO is the first step for a business to disclose the value of its financial performance.
What are some frequently asked questions about IPOs?
What are the ways to do an IPO?
There are many ways for a company to do an IPO. Some of the IPOs commonly performed by companies include:
To register for an IPO, how should a company prepare documents?
- Certificate of registration of IPO
- Charter of the company
- Written commitment to list or register for the trading of shares on the exchange system after completing the IPO.
- The decision of the General Meeting of Shareholders approving the plan to use the capital obtained after the IPO
- Underwriting commitment.
- Written commitment of significant shareholders to maintain holding at least 20% of the shares of the enterprise for at least one year from the time of IPO ending.
- The contract between enterprise and securities company with an advisory role.
- Bank’s document on opening an escrow account to receive money to buy shares of the first securities offering
Divestment What does IPO mean?
When a business receives investment capital through the issue of shares but does not create value for shareholders by using it excessively or in its own pocket to enrich its founders, it is considered a strategy. IPO divestment strategy.