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Anyone who always follows business news may have heard and be very familiar with news about big companies that we know have entered the IPO in the stock market. What does IPO mean? and why did most companies enter IPO? If you want t o know the answer, ACU PAY will take you to know the meaning of IPO and the reason why large companies want to enter.
Usually, in businesses, if you want to expand your business, you need to find more funding. If you do not use the capital that you already have, you have to borrow it from the bank, but if the borrowed funding is still not enough, registering in the stock market is another way to have more funding or IPO that we are familiar with.
IPO (Initial Public Offering) means that the company offers to sell its stocks to investors or the general public for “the first time”. Then the company will change from “private companies” to “public companies” that can allow others to participate in the investment. A company that would like to launch its IPOs will be listed on the Stock Exchange of Thailand (SET) through a qualification review process.
The objective of most major companies that launch IPOs is to expand their businesses and start looking for funding which is not only raising funds. One of the key channels for these companies is offering shares to interested investors, as well as providing opportunities for investors or interested people to participate as owners of the company.
As mentioned, for the company to launch its IPO, it must be verified by the Office of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET) will have guidelines to consider such as the structure of the shareholding, qualifications of directors and executives, financial statements, and a stable and reliable in-house system. The information must also be reported to investors who want to invest in this IPO.
Companies that launch their IPO, will have funding to further their business and have lower costs as well. IPO will be different from other types of funding sources of money such as bank loans because if it is an IPO, the companies do not have to repay principal or interest, instead, the companies will receive funding in exchange for their stocks. Sometimes companies will pay dividends to the shareholders.
Moreover, it increases the companies’ liquidity and makes the company expand to other countries or export their products to neighboring countries, as well as build credibility for their businesses because there will be a strict accounting audit.
In addition, listing in the SET will help the company become more well-known and better understand its products and what the business is about. These may attract customers to buy more goods or use services.
The company may lose its privacy, must disclose its information, and disclose it to the public. There is also a loss of ownership because when a company has good performance or good profit, it’s like sharing good things with others.
Moreover, the companies have to face more regulations and audits, resulting in increasing costs such as financial advisor wages and internal audit fees to meet the standard. The audit fee may be only around tens of thousands, but once listed on the Stock Exchange of Thailand (SET), it may increase to millions.
IPO stocks are known to be newly listed stocks in the SET. Therefore, investors need to study the company’s information before making an investment decision. The following techniques should be applied:
