IPO/SPO
An Initial Public Offering (IPO) is the first public sale of shares of a joint-stock company, including the sale of depositary receipts for shares, to the general public. The sale of shares can be carried out through the placement of additional share issues by open subscription or through the public sale of existing shares.
In the IPO preparation process, a company typically becomes public, significantly shifting its reporting towards openness and transparency.
There are several main objectives of conducting an IPO, the priority of which may vary depending on the specific case:
Relatively inexpensive capital raising for the company: selling own shares allows raising funds for an indefinite period without providing collateral and with minimal restrictions on the intended use.
Diversifying the investor base diversifies sources of funding.
Having publicly traded shares enables the quick and independent determination of the company's current value, which can be used to evaluate performance and motivate managers, as well as facilitate merger or asset exchange operations.
The liquidity of corporate rights for shareholders usually significantly increases after conducting an IPO. For example, banks are much more willing to provide loans against shares listed on the exchange than shares traded only in the over-the-counter market.
For investors, an IPO represents a fairly risky undertaking. Selling too many shares can weaken the mechanism of influence and management of the enterprise. Often, even large companies find it difficult to attract a sufficient number of investors willing to participate in their IPO. For small and medium-sized enterprises, this task is considerably more challenging.
A Secondary Public Offering (SPO) involves the public placement of shares owned by existing shareholders, usually the company's founders or venture funds. Unlike an IPO, an SPO does not affect the company's authorized capital size. However, such placement still makes the company public, meaning its shares are freely traded on the securities market. Additionally, the number of shareholders increases, enhancing share liquidity.
SPO is an offering of existing shares owned by someone, taken from the secondary market. Typically, through SPO, either the company's founders (original shareholders) or venture funds sell their securities, thus realizing their profit.
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