Initial Public Offering
Initial Public Offering
Initial Public Offering (IPO) is defined as “the first sale of stock by a private company to the public” (Snell & Wilmer, 2006, p. 1). “IPOs are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded” (Snell & Wilmer, 2006, p. 1). An organization that decides to go public must “understand and anticipate the business and legal issues it will face in its going public process may achieve significant time and cost savings and greatly increase its chances for a successful outcome” (Snell & Wilmer, 2006, p. 1).
Financial Issues Companies Face When Going Public
When a company goes public, they face financial issues involved in the transition. For starters, they must hire a well known, independent auditing firm to audit their books and get them in order as they need to disclose financial statements when going public. Organizations going public incur all the current and ongoing costs of being a publicly reporting company. Such costs include “complying with its Exchange Act reporting obligations and with applicable provisions of Sarbanes-Oxley. It will also need to comply with the listing standards of its chosen exchange or Nasdaq” (Snell & Wilmer, 2006, p. 5). Many steps must be taken when an organization goes public, and the financial issues are one of the main factors.
Issues That Impact Dividend Policies
An investor who purchases stock becomes a shareholder in the company issuing that stock. The investor selects which stock to purchase by deciding which business will increase his or her wealth. As a company becomes more profitable, shareholders become wealthier. Although, different forms of dividend payouts, including stock splits, stock dividends, property dividends, and stock repurchases, the most common form is a cash dividend paid to shareholders. The dividend policy of a company...
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