Avara-Initial Public Offering



Avara-Initial Public Offering

Companies that need resources (money) to finance its operations or expansion projects, can get the finances through stock market by issuing securities (shares, bonds, commercial paper, etc.) that are made available to the investors (placed) and exchanged (bought and sold) in the stock market.

An initial public offering, usually known by its acronym IPO, is a process by which for the first time a company decides to sell their shares to the public, thus allowing investors to participate in the growth of the company.

To make a public offering and placement of securities, the company goes to a broker that offers (market), shares to the public in the stock market. Once the values placed among investors in the stock market, they can be bought and sold in the secondary market.

Going public is a long and complicated process that can not happen overnight. Businesses planning to go public need to get a professional advice and assistance in many areas of legal, technical, financial and marketing aspects. In addition, many investors are now requiring companies to show a publicly traded long-term history of good corporate governance practices before initial public offer. In particular, investors and the market highly value the company's practices in the areas of the board of directors, shareholder rights and transparency and disclosure (Shmuel, 2006).

IPOs offers a great opportunity for Companies to raise large amount of capital for business. There is no doubt that the present state of the economy is very tough for the investors. The main reasons are the recession that the economy is suffering from and need proper strategies to deal with the issue. However, the option of Initial Public Offering can provide lots of benefits to the companies. The main reason is the funds that the companies that can obtain by investing money in shares. Therefore, the assignment will focus on various positive and negative aspects of Initial Public Offering. If the importance of IPOs in the US relative to its economic importance in the world were unchanged, the difference between the US and the world should stay constant over time. Instead, the difference has widened. The importance of IPOs in the US relative to the world has not kept up with the economic importance of the US. This decline in IPO activity by US firms has caught the attention of both the financial press and policymakers.

Through the issuance, of an IPO company can raise a significant amount of capital at a limited time. It can expand the investor base of the company by distributing the ownership with individual investors. However, IPO also raise some issues as it requires a company to follow numerous regulations and bear the issuing cost. It is also possible that the company may not get the same response in times of recession as expected during normal times (Lipman, 2008).

IPO are issued in the Primary market, which can offer Avara an opportunity to raise capital through issuance of shares to new investors, making it ...