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      Question

      Which of the following can be regarded as the outcomes

      of Initial Public Offering?
      A Increasing and diversifying equity base Correct Answer Incorrect Answer
      B More exposure, prestige and enhanced public image Correct Answer Incorrect Answer
      C Rise in marketing and accounting costs Correct Answer Incorrect Answer
      D Necessity to disclose sensitive financial and business information Correct Answer Incorrect Answer
      E All of the above Correct Answer Incorrect Answer

      Solution

      Advantages: Increasing and diversifying equity base Cheaper avenues of raising capital More exposure, prestige and enhanced public image Ability to attract and hire better employees and the management to oversee them through liquidity participation Creating multiple financing opportunity through equity, convertible debt etc Disadvantages: Rise in marketing and accounting costs that will munt as time goes on It is necessary to disclose sensitive financial and business information. More effort and attention are required of the management to ensure an IPO goes smoothly. Public disclosure of information might be exploited by competitors or even customers The initial shareholders may lose independence as new ones will come in through the ability to buy new shares. The company will be exposed to risk of litigation, private securities and other forms of derivative actions.

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