Many companies fail to pass the screening process and fail to be listed while conducting such IPO. The reason for this complicated and demanding process is, of course, to put only certain and reliable companies on the stock market. Then, why do companies proceed with IPO through a difficult process? What are the advantages and disadvantages of the IPO
Advantages and disadvantages of the IPO
Advantages
IPO’s primary purpose is to raise corporate funds. It aims to facilitate financing as corporate stocks are traded in the stock market. By receiving funds, you can expand and grow your business while increasing your competitiveness.
In addition, you can enjoy additional benefits by having the title of a listed company. It can increase the company’s awareness and employee morale, and it is also advantageous when receiving investment. In a similar vein, you can also see the effect of increasing corporate reliability. This is because listed corporations must disclose management and financial information every year. That’s how transparent the company is.
As such, the advantages of IPO seem to be widespread, but of course there are disadvantages as much as disclosing corporate information.
Disadvantages
The most representative disadvantage of IPO is that management rights can be weakened. As the company’s ownership is dispersed, shareholders can put pressure on its management. In particular, if shareholders invest in the future of the company, there is a high possibility that the pressure on management will be severe. That’s how difficult it is to maintain a management with conviction.
In addition, investors can gain credibility by providing corporate management and financial information, but they also have to take the risk of exposing important corporate information to the outside world. As a result, it could become a target for speculators and put the company on the verge of extinction. In fact, there are often companies that are closed by speculative forces after IPO.
Therefore, if a company lacks solid management skills and crisis coping skills, it will clearly feel its disadvantages rather than its advantages.
Today, we looked at the meaning, advantages and disadvantages of IPO. Now you can understand what IPO means for listing. Information power is important for stock investment, but it must be clarified from the basic conceptual arrangement.
