Читать книгу Investment Banking For Dummies - Matthew Krantz - Страница 74

When a company goes public, it can raise hundreds of millions if not billions of dollars overnight. Literally. Isn’t capitalism wonderful? But hopefully the money isn’t being raised so the CEO can throw a heck of a party or buy a billion black hoodies. The money being generated by the IPO is for some sort of corporate purpose, and it’s in this section of the prospectus that this purpose is revealed to investors.

Normally, a young company going public is raising money because it needs cash to expand and grow. But there are other reasons why a company may go public, including to pay off part of its debt, to purchase another company, or to allow its employees to sell their shares and raise money. Whatever the reason, it must be outlined in detail here.

IPO investors usually look askance at IPOs where the money raised isn’t being used by the company. Investors are especially skeptical when many of the shares being sold in an IPO are being sold not by the company itself, but by the CEO and other company executives. After all, these insiders know the company better than anyone. If they’re bailing out, why would investors with less information jump in?