VPS | IPO And It’s Benefits

Enterprises often have the need to raise capital to support the expansion of their business operations. One of the common ways to raise capital is through issuing shares to the public.

Access to abundant capital

Becoming a public company allows enterprises to access abundant capital on both domestic and international capital markets. This capital is used to finance biological and mechanical growth activities through acquisitions, mergers, and divestitures. For enterprises with limited internal capital and unfavorable borrowing options, raising capital through stock issuance is a suitable choice.

Liquidity and exit opportunities for existing shareholders

Becoming a public company and listing shares on the stock market focuses on establishing the reasonable value of stocks through market supply and demand relationships. As a result, stocks can be easily traded, minimizing transaction costs. IPOs are often considered the optimal solution for private shareholders such as financial investors, venture capital funds to exit after a certain investment period. Existing shareholders can also use their stocks as collateral for personal purposes. The liquidity of stocks increases their attractiveness and facilitates the capital-raising process.

Maximizing enterprise value

IPOs typically attract the participation of institutional investors as well as large individual investors. These investors have abundant capital and professional investment analysis experience. Therefore, the enterprise will be most reasonably valued by large investors, and they are willing to pay a fair price. The value of the enterprise (market capitalization) is thus publicly established at the optimal level.

Enhancing professional image

Listing on the stock market often attracts the attention of the mass media. Thus, it helps to promote the image of the enterprise and its products and services to a wider audience. Enterprise activities are also reflected in reports by independent and professional securities analysts. This will enhance stock liquidity and expand the customer base.

Enhancing capital-raising capabilities

Issuing securities to the public creates a positive image and enhances the trust of sponsors in the enterprise. Consequently, the enterprise will find it easier and more cost-effective to raise capital, especially borrowing from banks. Major banks are willing to cooperate with listed companies due to the transparency of information and corporate governance.

Issuing securities to the public increases the net asset value, enabling enterprises to obtain large capital and borrow from banks at more favorable interest rates and less complex collateral terms.

Increasing the trust of partners and customers

Partners and customers often trust public companies more than private companies due to the transparency of information. Partners believe that public companies are subject to strict supervision by regulatory agencies. With this advantage, enterprises can negotiate better business terms and conditions with partners.

Enhancing employee engagement

Becoming a public company helps enterprises attract and retain talented employees because when selling shares to the public, enterprises allocate a certain proportion of shares for sale to their employees. In developed countries, large enterprises have employee stock ownership plans (ESOP). With stock options, employees become shareholders and earn returns on capital instead of regular income. This helps employees work more efficiently and consider the success or failure of the enterprise as their own.

Enhancing enterprise operational efficiency

The IPO process requires enterprises to undergo comprehensive analysis and evaluation, and professional business model consulting. Therefore, enterprises have a good opportunity to build a professional management system and develop a clear development strategy. In addition, the presence of non-executive board members following corporate governance requirements also helps enhance monitoring and balance in enterprise management and operation.

Issuing securities to the public increases the quality and accuracy of enterprise reports as these reports must comply with prescribed standards. This makes it easier and more accurate to evaluate and compare enterprise performance.