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What is an Initial Public Offering and Which IPOs The Market Awaits?

What is an Initial Public Offering and Which IPOs The Market Awaits?

 

Initial Public Offering (IPO)- Concept

Initial Public Offering or going public is the process that companies go through when they issue securities for the first time. The entity qualifies for an IPO once has strong fundamentals and proven profitability potential. IPO transforms a business from a privately owned entity into one that is owned by public stockholders.

Initial Public Offering- Opportunities

Going public provides a great opportunity for the company to raise a lot of money in the hope of growing and expanding the business. It enables the entity to attract better management talent and provide them with an incentive to perform well.

On the other hand, it poses a good trading opportunity for the public to acquire the company’s shares. IPOs are known for having volatile opening day returns that can attract investors looking to benefit from the discount involved and target the appreciation of their investment and possibly dividends.

One of the biggest advantages IPO offers is raising capital more than once, as the company can issue in the future new shares and sell them through secondary offering because it already has access to the public markets through the IPO.

Initial Public Offering - Challenges

Going public involves significant changes for business including a loss of flexibility and control for management. To offer shares for sale via IPO, the enterprise must be a public limited company, and when applies for listing on the stock exchange, it must comply with a series of rules.

Once listed, it should comply with another series of ongoing obligations such as making public all price-sensitive information and issue the annual and interim report with accounts to shareholders within a set time frame. Price sensitive information is news that would be expected to move the company’s share price once in the public domain, such as changes to the company’s forecast trading prospects, dividends announcements, etc.

However, there is no guarantee that an IPO will succeed in selling all offered shares, and in times of turmoil, it is common to withdraw the IPO or maybe postpone it.

Impending IPOs to Watch

The Coronavirus pandemic has impacted the IPOs market and caused companies to postpone going public. Companies like Airbnb, Robinhood, Palantir, Snowflake are among the hottest IPOs to watch for in 2020.

This information/research prepared by Mahmoud Alkudsi does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk. The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest. The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.