Essay on Ipo Versus Private Placement

613 Words 3 Pages
Business is all about money. Whether starting a business or growing and expanding, business owners need money -better known as capital. This provides an opportunity for investors who trade their money for potential future profit. Both private placements and initial public offerings, or IPOs, are methods of raising capital for a business.

Initial Public Offer (IPO) | Private Placement (P.P) | The first sale of stock by a company to the public. IPOs are often used as a way for a young company to gain necessary market capital. When a company goes public, its financial data and corporate structure become public as well. | The sale of securities to a relatively small number of select
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| In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market. Also referred to as a "public offering". | It does not require the assistance of brokers or underwriters as they are considerably less expensive and time consuming. |

Initial Public Offer (IPO) | Private Placement (P.P) | IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. | Investing in private placement leads to the high risk, high reward, and limited opportunities. Internal growth, recapitalization, and acquisitions can provide investment opportunities in privately held companies. | The shares will be highly liquid. | Private placements are less liquid than public offerings, however, and may leave investors with few options if they need to sell. | Public offerings are more expensive for companies, so may cut into overall profit over time. | Private placement is less expensive and faster than a public offering. | There is prestige in an IPO. | Private placement has been appropriate when a company lacks the financial strength or reputation to appeal to a board base of investors and cannot afford

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