To raise capital, a private firm may decide to offer shares to the public. When they do it for the first time, this is known as an Initial Public Offering and the company may be referred to as being ‘floated’ or ‘going public’. Usually, underwriters assist businesses in agreeing on a stock price at which stocks should be sold.
For example…
Jenny owns a sportswear company and she was lucky enough to have strong investor support as her business grew. However, in order to market to a younger target audience, Jenny needs more capital than her investors can give. She decides to float the company or do an IPO. Trading on the stock exchange allows more visibility and the public can invest in shares in her already successful business. This extra cash flow, in the form of investor shares is great news for Jenny and her ambition to grow her business further.
