May 18, 2022 6:48 pm

How is the path traveled by companies that go public

1.IPO. This week, Banco de Valores (BV) began trading directly on BYMA (Argentine Stock Exchanges and Markets), having completed the merger process with its former majority shareholder, Grupo Financiero Valores (GFVSA). The operation by which a company begins trading on the market is known as IPO (Initial Public Offering). An IPO means that a private company decides to sell its shares to the public for the first time, allowing investors to participate in its growth. To grow and expand, a company has two options: incur debt (with issues such as corporate bonds) or go public. In the second case, the company receives a capital injection from the sale of its shares. It must then be accountable to its shareholders, and the control mechanisms are quite strict.

2. Financing. A project can raise funds by issuing debt or equity. If the company requests a loan or any other type of financing, it must repay the money with interest. Even if you don’t get the expected results, you still have to pay the money. If the company goes public, it is the investor who takes the risk, because if the company does not have the expected result, the investor who bought shares is the one who loses. In exchange, the investor participates in the profits of the company, if the result is positive. In addition, when a company offers its shares on the stock market, in the face of society, investors, customers and suppliers, it presents an image of greater solvency, recognition and trust.

3. Procedures. To carry out an Initial Public Offering, the company must carry out an extensive procedure. On the one hand, there are authorization procedures before the authorities and organizations in charge of supervising the financial markets. The CNV (National Securities Commission) requires information on the financial statements and the minutes of the extraordinary meeting that decided to request the listing on the market. Then, the company must contact banks or specialized investment funds, which will make a valuation of the company to determine at what price the shares should begin to be sold. In addition, they will contact savers who, in their opinion, may be interested in buying shares.

4. Home. The IPO process concludes when the company’s shares are first traded on the financial markets. This day is called the Stock Listing Day. The company in question usually makes a symbolic “ringing of bells” at the opening of the markets, announcing its IPO. Since then, the shares can be bought and sold freely and the prices will go up or down depending on whether there is more or less interest from investors. For its part, the company must comply with obligations periodically; You must make your accounting information public and disclose the main events.

5. Record. In 2021, there were 2,097 IPOs in the world, for which US$402,000 million (equivalent to an Argentine GDP) were raised. There was an 81% increase in collections and a 51% rise in the number of IPOs in 2020. That year, 426 technology companies and 332 related to the health sector went public: together, they represent almost 42 % of total revenue of companies that went public.

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