All companies are theoretically privately-owned before they enter the Initial Public Offering (IPO). Start-up companies or companies wishing to enter IPO, in pre-IPO is a small-grown business. They only have a few shareholders, early investors; venture capitalists or angel investors. IPO is a dream for almost all start-up. They want to go public, get people to know the business, raise capital, and gain more profit.
So these companies will pursue a maturity process where after that they must measure how ready they are to meet Securities and Exchange Commissions (SEC) regulations. If they are confident about SEC regulations for profiting and committing responsibilities, they can start to advertise their interest by going public through IPO.
It sometimes takes companies to reach private valuation as much as $1bn in the growth stage to enter an IPO. In other words, it is in unicorn status. But, basically, as long as a company has strong fundamentals and proven profitability potential, they can enter an IPO. They can do it with various valuations, depending on the market competition and listing requirements responsibility.
When a company gets into an IPO, it converts into publicly-owned. Before, they were privately-owned.
Therefore, the existing private shareholders turn into public trading prices. From private to public ownership, IPO underwrites the price through due diligence.
Listed in an IPO means the company will receive huge opportunities for millions of investors to buy the company’s share. Then, it will surely contribute to a company’s shareholders equity. The investors could be from individual or institutional investors who are willing to invest in the company.
Therefore, the company’s sell shares will generate the new shareholders’ equity value. To add a view, this shareholders’ equity covers both public and private investors. IPO can help the company get more cash from the primary issuance.
