Concerning the IPO (Initial Public Offer), use short sentences in 1 or 2 lines to answer:        1) Why are they used by private companies? 2) Why the disclosure of financial statements is seen as a disadvantage? 3) Who are selling the company’s shares in the offering day?

An IPO is an initial public offering which is the process of offering shares of a private company to the public to raise capital

1. An IPO is used by a private company inorder to raise capital. The capital can be used for expansion or the fund any corporate expenses/ working capital expenses

2. A firm will have to disclose its statements in compliance with the Generally Accepted accounting principles (GAAP). The cost of this disclosure is often very high as they will have to hire accountants, auditors, a corporate governance team, IR team. Hence the disadvantage is due to the fact of the extra cost involved.

3. They are selling their shares to retailers & institutional investors who are willing to purchase the shares at the given price.