What is an IPO?
Written by True Tamplin, BSc, CEPF®
Updated on June 21, 2021
Initial public offering (IPO) is the act of opening the company’s capital to investors on the stock exchange, allowing its shares in the company to be traded by brokers and to have fluctuating prices according to the market.
Purpose of an IPO
Often issued by emerging companies with expansion plans, IPOs are an excellent medium for raising capital.
They also allow large, privately-owned companies to be able to receive a public negotiation.
Once a company enters such a process, it ceases to be a private company and instead turns into a publicly-traded company on the relevant stock exchange.
The IPOs are regulated by the Consolidated Finance Act (Legislative Decree 58/1998), which includes a whole series of information and transparency provisions.
Investors who are potentially interested in the Initial Public Offer (i.e., the recipients of the offer) have the right to know all the useful information to understand whether or not they should join the IPO in full awareness.
The process is long and complicated and involves a whole series of very different subjects.
Here are which:
- the issuing company
- the global coordinator
- the sponsor
- the specialist
- the financial advisor
- the law firms in charge
- the members of the placement consortium
Typically, an IPO can last from one month to six months, if you consider the whole procedure in its interest.
And this also has consequences on the possibility of trading with CFDs (the Contract for difference, contracts by which you can invest in an asset without owning it directly).