FIN 260 Lecture Notes - Lecture 59: Initial Public Offering
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• IPO’s:
➢ The Primary Market for Stock:
o There are basically 2 types of primary issues:
1. *Initial Public Offering (IPO): a company first issues stock.
2. Seasoned Equity Offering (SEO): an already established public
company (a company with public stock already outstanding) issues
new stocks to raise money.
➢ Pros of an IPO:
o Additional Capital
o Enhanced Liquidity
▪ Private firms offer no easy way for investors to sell their stock.
▪ Public firms allow great liquidity.
❖ Allows for more capital investment over time.
➢ Cons of an IPO:
o Have to supply much info to investors & regulators.
▪ Costly
o Substantial one-time costs of going public.
▪ Fees to underwriters
▪ Legal fees
▪ Auditing fees
o Underpricing.
▪ Most IPOs are underpriced in primary market.
▪ Company doesn’t receive as much capital as it should.
➢ Period Before IPO is Issued:
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