Companies have several options for raising capital, but a popular route is issuing stock to the public. For a private company to reach the widest range of investors, it must become a public company, and that’s where IPOs come in.
An initial public offering is the process by which a company first sells its stock to the public and becomes a publicly traded company. Once a company decides to move forward with an IPO, it must work with an underwriter to create a prospectus.
The primary benefit of going public via an IPO is the ability to raise capital quickly by reaching a large number of investors. A company can then use that cash to further the business, be it in the form of research, infrastructure, or expansion. Additionally, by issuing shares, newer, lesser-known companies can generate publicity, thus increasing their business opportunities.