Learning Investment - In various media, of course you
often hear about an IPO or Initial Public Offering. Actually, what the terms of
the IPO in the stock market? What is its purpose? All will be answered in this
article.
Definition
of IPO (Initial Public Offering)
In the Indonesian language, referred
to as the IPO Initial Public Offering. Thus the IPO is a company's stock is
first released to be offered or sold to the public / public. Therefore,
companies that did IPOs often called being "GO PUBLIC".
See also Go Public Processing
Interest
IPO
Why would a company want to take off
or sell its shares to the public / community? There are a variety of reasons
companies do IPOs, which are:
1. Get a low-cost funds. Companies
can obtain funds from various sources such as issuing bonds, borrowing money
from banks. But both methods have an obligation, that pay interest. Meanwhile,
if the company off the stock to receive funds, the company is not burdened with
interest.
2. The financial performance of the
company better. By getting the funding cost, the company could pay the debt and
improve its financial reports quickly.
3. The potential for faster growth.
Companies could use the funds internat for expansion, for example, to open a
branch. But if it has a low cost funding, could expand more quickly and in the
long term potential of the company's growth could be even greater.
4. Improving the image of the
company. The public company will always be highlighted media. When able to be
managed well, the media spotlight could be an indirect marketing tool for the
company.
5. Increase the value of the company
as a whole. By going public, the company's value is much likely to rise in
future due to higher stock prices. If the company is perceived to have a good
performance by investors, the stock has also increased opportunities for
advancement.
Generally, shares released to the
public only a fraction of the total number of shares of the company. For
example PT A shares to the public release of 10% of the total shares. Number of
shares released to the public is 1 million pieces. Initial share price of
Rp 10,000 per share. Then the overall value of the company is: (100/10) x share
price x number of shares = (100/10) x Rp 10,000 x 1,000,000 = 100 billion
For example, the stock price after
the IPO increased to Rp 20,000. Then the overall value of the company now is:
(100/10) x share price x number of shares = (100/10) x Rp 20,000 x 1,000,000 =
200 billion. So the increase in the company's stock price after the IPO, will
also enhance the company's overall value.