Initial Public Offering (IPO) is a growing trend for companies that start small and gradually pick up momentum along the way to go public through the process of IPO. Going public and offering stock in an initial public offering represents a milestone for most privately owned companies. A large number of reasons exist for a company to decide to go public, such as obtaining financing outside of the banking system or reducing debt. Furthermore, taking a company public reduces the overall cost of capital and gives the company a more solid standing when negotiating interest rates with banks. This would reduce interest costs on existing debt the company might have.
The main reason companies decide to go public, however, is to raise money and spread the risk of ownership among a larger group of shareholders. Spreading the risk of ownership is especially important when a company grows, with the original shareholders wanting to cash in some of their profits while still retaining a percentage of the company. One of the biggest advantages for a company to have its shares publicly traded is having their stock listed on a stock exchange. Some of the main stock exchanges that companies considering IPO are NASDAQ, New York Stock Exchange, London Stock Exchange, Singapore, and Dubai Stock Exchange.
After listing in any of the above stock exchanges, companies have additional leverage when obtaining loans from financial institutions as well as market exposure by attracting the attention of mutual and hedge funds, market makers and institutional traders.