The how, what, and whys of Initial Public Offerings (IPOs)

Everything you need to know about IPOs both as the owner of a company, and as a possible investor

Every time that a company making an Initial Public Offering (IPO) enters into the news cycle, there is some confusion as to what exactly an IPO is and how it works. As the name suggests and one might intuitively guess, an IPO is when a private company decides to go public and offers people the opportunity to buy shares or stocks in it. 

But to understand the technicalities of this, one must know what stocks are exactly and how they work, as well as the different ways that one can participate in an IPO and the advantages and disadvantages that come with these different ways. Essentially, an IPO happens when a company is looking to gain capital and turns to the general public for it rather than getting a loan from a bank and increasing their debt. It usually means that a company is looking to expand and expand at a certain rate. 

However, in Pakistan, IPOs are not that common and a lot of family owned companies that have made it big (think Tapal or Shan) want to keep the business limited to themselves and shy away from going public. This is mostly due to the business culture in Pakistan, but if a large privately owned company in Pakistan wanted to raise some serious capital and go on an aggressive expansion project.

 

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Ariba Shahid
The author is a business journalist at Profit. She can be reached at [email protected] or at twitter.com/AribaShahid

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