Financial Analysis

Financial Analysis

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Initial Public Offering

It is the offer of company 's securities to the public which were previously not traded in the stock exchange . These shares are offered to the public the stock exchange

The shares to be listed could have been previously held by private investors and or promoters of the company . Promoters are those investors who support the business during its initial formation

Initial public offering is a complex process that involves many institutions and it is therefore

prudent that before considering an IPO Superior Living Inc . should consider its cost . A cost benefit analysis could be undertaken to determine this cost

The step undertaken during an IPO includes

The hiring of a manager usually investment bank that will ensure effective running and management of the IPO to ensure it is successful

What follows after the investment bankers hiring is the performance of the due diligence on the company . This is where the IPO manager examines the company 's books and its operations to ascertain its value . The IPO manager performs this together with a team of accountants , lawyers , and marketers . This also where the prospectus is produced and presented to the Securities Exchange Commission . After the approval of the prospectus by the SEC , the IPO is marketed to the potential investors . This is done through holding seminars conferences etc . This process is important because it determines the success of the IPO i .e . whether it is oversubscribed meaning success or undersubscribed meaning a failure

The final phase of the IPO process is the offering of the stocks to the investors through brokerage firms . To ensure that the public gets full access the company should use all available brokers so as to reach wide market

Despite all these complex and costly processes , an IPO has several advantages to the company key among them

IPO enables superior living Inc . to have a wide access of capital in the stock market through the company issuing more stocks and even debts Shares traded in the stock market are liquid and therefore the company can dispose more shares e .g . through a rights issue

The other benefits of listing are that companies listed in the stock market have the publicity through electronic and print media which enhances their image . The investing public and customers usually have high regard on listed companies . It is even possible for companies listed to merge or acquire other companies because of their enhanced image . Companies listed in the stock exchange are perceived by the investors as stable and strong . This enables the company easily get capital from the public or financial institutions

Any future capital requirement by Superior Living Inc . will be facilitated by its listing in the stock market . This is done through issue of debt certificates and issue of more stocks e .g . through a rights issue or the remaining authorized stocks

The drawbacks of listing include

Where the company lists , many investors buy into the shareholding of the...