AS A Level Business: Going Public

A lot of companies start as private limited countries for various reasons
However eventually a lot of companies eventually “go public”
Going public-is when a private limited company is converted into a public limited company
When a private limited company goes public it usually does this through an Initial Public Offering (IPO) i.e
Its shares are offered to the public for the first time
This is normally done using an underwriter
An underwriter is a bank or other financial institution that pledges to buy all the unsold shares in an issue of new shares
Going public is considered a natural and desirable part of a company’s growth phase
After a company goes public its shares will now be available for trade on a stock exchange, for example, the Zimbabwe Stock Exchange or Johannesburg Stock Exchange

To allow early investors to recoup some of their equity usually at a profit. Most companies are funded by venture capitalists and angel investors during their early growth phase. Going public allows these investors to easily dispose of their interest and reward them for taking a risk by investing early in the business.
To raise more capital-being able to sell shares to the public means that the company now has a larger pool from which it can raise capital.
To acquire new capital equipment-related to the above but in this case, the business will be looking to acquire specific property, plant and equipment
To develop new products- for example, to raise more money for Research and Development (R&D)
Diversifies ownership of the business- as already pointed out above usually most of the stake in private company startups are owned by a few very influential investors. To reduce dependence on these individuals and entities a company might go public.
Allows early investors of the business to cash in and attain prestige

To access more topics go to the Advanced Level Business Studies page

AS A Level Business: Going Public- Updated 2024