What is an IPO?
In today’s post, you will learn about IPOs, what they are, and how it affects you the investor.
An initial public offering (IPO) is a process where a private company decides to offer its shares to the public and those shares begin to trade on the stock market like the Ghana Stock Exchange or globally in markets like the New York Stock Exchange (NYSE) or NASDAQ.
When a company IPOs, you can now buy shares of that company using InvestSika because they have now been listed on the stock market.
If you haven’t, please chat with Kojo of InvestSika here, it will only take two minutes of your time.
Why do companies go public?
There are a lot of reasons why a private company can go public, some of them include:
Raising more money: With an IPO a company can get the entire public to invest in them which is a great thing.
Exit path for earlier investors: Investors that backed these companies when they were public can also sell their shares during an IPO and get today’s worth of the investments they made sometime in the past.
Increase in brand value: A private company with high growth potential can increase its brand value, company’s exposure, and public image by going public.
If you missed the first one, please chat with Kojo of InvestSika here, it will only take two minutes of your time.
How do IPOs work?
Remember Kojo and his shopping center businesses with 9 of his friends as investors? You can read the first two posts here. This is some ten years later and the business is now international, with centers in Nigeria and Togo and with more investors putting in their money to fund the various expansions.
Now they want to open more centers in Kenya, Tanzania, and Rwanda so they need even more money so they agree to go public so they can raise money from the public. They intend to list on the Ghana Stock Exchange to do so, they will first hire a few investment banks who will put together some money and buy the shares the company wants to publicly list. Then they will do due diligence which basically involves cross-checking financials, business models, and growth projections, and finally, file IPO papers with the Securities Exchange Commission (SEC).
After the SEC approval, the company and the underwriters which are the investment banks will choose an initial market price of a stock of the company and a date to begin trading publicly and on that day, the stock becomes available for trading on the Ghana Stock Exchange.
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As an investor, there are thousands of publicly traded companies that give you options while choosing who to invest in. You can buy stocks from over 2,000 companies with InvestSika.
Wrapping up
InvestSika lets you buy shares of companies that are publicly listed on local and global stock markets like NYSE and NASDAQ easily using your mobile money in just three clicks. Join SikaTribe to learn more about financial freedom through investments.
