Question

Q. Consider the following statements with reference to Initial Public Offer (IPO)

Which of the following statements is/are correct?

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. Neither 1 nor 2

Answer 1

The correct option is B 2 only

Explanation:

• Statement 1 is incorrect: IPO is the process when a company sells its shares for the very first time to the public. It is called an initial public offering for this reason. Thus IPO is a process through which a private company becomes a public company.
• Statement 2 is correct: An initial public offering (IPO), otherwise known as a stock market launch, is a public offering in which shares of a company are sold to investors. Initial public offerings can be used to raise new capital for companies to gain more funding to monetize the investments of shareholders An IPO is a crucial step for a rising company as it is a gateway to raise additional fundings. This allows the company to grow beyond its initial setup and additionally leads to better transparency and credibility that can be a factor in attracting new investors and when seeking to borrow more funds in the future.