10.2Why does a company launch an IPO?
1What is it?
To raise growth capital, repay debt, let early investors exit, and gain visibility and credibility.
2Why does it exist?
The objects of the issue section in the offer document says exactly how the money will be used. Read it.
3Practical use
Be more cautious if most of the IPO is early investors selling (OFS) and little money goes into the business itself.
4Quick revision
- Growth, debt repayment, investor exit, visibility.
- Read "objects of the issue".
5Knowledge check
Q1. Where do you find how IPO money will be used?Show answer
"Objects of the issue" in the RHP.
Q2. Why is a 100% OFS IPO a point to think about?Show answer
No new money goes into the company; only existing holders sell.
Q3. Name two reasons for an IPO.Show answer
Raise capital, repay debt, give investors an exit, gain visibility.