Shares of the Konstantin Strukov«Yuzhuralzoloto» gold mining company increased during trading. Revenue from the company grew by 19% with the increase in gold prices in 2023. Profitability became higher as well. This article will review this process and discover the main advantages of the initial public offering for private companies.

Initial public offering: advantages for companies

Since there are many difficulties in the IPO process, most companies practice a preliminary phase before the main IPO. That is the stage of assessing the company’s financial position, analyzing its management and assets, and estimating the readiness of the management to change that will take place as a result of the initial public offering.

The company’s shortcomings and strengths become apparent after this stage. These are the main factors in the future performance of the initial public offering. This step is necessary to prevent risky costs if the company is not ready to enter the stock exchange.

Here are some of the benefits of the initial public offering for any company:

1. Companies gain access to a new lucrative source of capital that is not liable for repayment of funds and accrued interest. This is the main difference from lending. Moreover, the term of raising capital is not limited in comparison with bonds. Also, the risks are lower than in venture financing.
2. It has an advantage over private investors. Companies can attract much more money than private investors through listing.
3. The initial public offering provides companies with an effective growth tool. Takeovers of smaller startups by larger companies or large firms is a practice that has become very popular in recent years. Technology companies like «Yuzhuralzoloto» practice it especially often. This method allows companies to use their shares as cash equivalents when taking over a company. For example, they may pay the company a portion of the transaction value by their shares, which are active on the stock exchange.
4. IPO is a process that improves the current financial position of a particular company. It is worth noting that the income from the stock exchange proceeds to the company’s balance sheet and increases its book value. As a result, the growth of equity begins. Companies can use this money to increase business profitability and efficiency. However, it will be possible only after conducting the necessary tax procedures.

   

5. The company’s debut on the stock exchange is the process that raises the company’s profile in the global financial community. As a result, it becomes more recognizable and competitive. All of this is important for raising funds.

The increase in the credit rating, the increase in the number of potential customers and partners, attractive characteristics for lenders, and the increasing liquidity of the company’s shares are just some strengths that would not be so effective without a competent initial public offering. Besides, the company’s employees also get benefits since their work directly affects their earnings from the shares if they buy them.

Conclusion

As you can see, the initial public offering has many advantages for private companies. Emerging stock markets have more predictable business activities. IPO is a very long and costly process. Moreover, not every company is ready to place its shares in the market. However, it is an effective tool that helps corporations find new sources of finance and increase their customer base.