Question : Case Study 2:
XYZ Enterprises is a technology startup aiming to expand its operations globally and requires significant capital infusion.
Question :
If XYZ Enterprises decides to go public and issue shares for the first time, which process would it engage in?
Option 1: Private Placement
Option 2: Initial Public Offering (IPO)
Option 3: Rights Issue
Option 4: Follow-on Public Offering (FPO)
Correct Answer:
Initial Public Offering (IPO)
Solution : The correct answer is (b) Initial Public Offering (IPO)
If XYZ Enterprises decides to go public and issue shares to the public for the first time, it would engage in an Initial Public Offering (IPO). An IPO is the process through which a private company becomes a publicly-traded company by offering its shares to the general public for the first time. It involves the issuance of new shares to raise capital and allows the company's shares to be traded on a public stock exchange. In an IPO, the company works with investment banks to underwrite and manage the offering, determine the offering price, and market the shares to potential investors. This process involves regulatory filings, due diligence, and meeting legal and financial requirements set by regulatory bodies like the Securities and Exchange Commission (SEC) in the United States.
