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Initial Public Offering (IPO)

Initial Public Offering (IPO)Process by which a company becomes listed on an exchange

A company usually prepares and executes an IPO with the support of an issuing bank, or, in the case of large-scale issues, in conjunction with a syndicate.

Companies go public primarily as a means of raising additional equity capital and as an exit channel for the original capital providers (e.g., venture capital companies). Additional benefits of an IPO include a higher profile for the issuing company and a broader investor base. It is more advantageous for a company to go public during a bull market because this increases the likelihood that all new shares will be purchased, thereby lowering the cost of capital for the issuer.

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