Why make an IPO?
Private companies have a lot of control over their companies, but their funding sources are limited. While some of these companies have achieved valuations over one billion U.S. dollars, called unicorns, most have trouble finding the cash to grow their business. To open themselves to public investors, they make an initial offering of shares of stock. The largest IPOs are worth billions of U.S. dollars.
Timing is everything
The timing of an IPO can have a huge impact on its performance, which is as important for investors as it is for the companies themselves. As such, many investors watch to see who is next in line to make an IPO. The right play at the wrong time is the wrong play and might result in a negative return. While underwriters and consultants can mitigate some risk factors, markets are inherently unpredictable. As such, an IPO always carries risk, with hopes of the reward of an infusion of capital.