Public Offering

Understanding Public Offering

In the realm of trading, Public Offering holds a significant place that every trader, whether expert or novice, needs to understand. A Public Offering refers to the process where a company sells its shares to the general public for the first time. This term is often used interchangeably with Initial Public Offering (IPO).

Types of Public Offering

There are two key types of public offerings:

Initial Public Offering (IPO)
Following Public Offering (FPO)

An Initial Public Offering or IPO is when a company goes public for the first time by offering its shares to general investors. On the other hand, a Following Public Offering or FPO occurs when a public company offers new shares to the public after its IPO.

Public Offering: The Process

The process of a Public Offering includes several important steps: Planning, Choosing an Underwriter, Submitting documentation to the Securities and Exchange Commission (SEC), Setting the price, Selling of shares, and finally, Going Public officially.

Benefits of Public Offering

There are multiple benefits associated with a Public Offering. It allows a company to raise capital, gives the company an increased public image and leads to greater liquidity. It can also provide the company with a currency in the form of its own stock to make acquisitions.

Drawbacks of Public Offering

Despite the benefits, Public Offering does carry with it certain drawbacks. These include increased regulatory scrutiny, pressure to meet shareholders' expectations, and the cost and time involved in the Initial Public Offering process.

Public Offering and Trading

In the context of trading, Public Offering represents an opportunity to buy into a company at the initial offering price, often before the stock starts trading on open market. This can potentially result in significant profits if the share price increases after the Public Offering.