What does IPO mean? It refers to the process of offering shares of a privately-owned company for sale to the general public. The first time these shares are offered is called IPO. There are various reasons as to why a company wants to go for IPO, where the more common ones as follows:-
1. Fund raising
Many times when a private owned company wants to raise funds, the financial institutions will insist on collaterals and guarantees, and therefore, the amounts of funds to raise will be limited to the size of the collateral. In the case of IPO, the funds that can be raised will be determined by the confidence of investors on the company, with regards to the growth potential, management team, governance etc. In an IPO exercise, the fund raising potential is way beyond the amount that the company can raise via financial institutions.
2. Low funding cost
Comparing to funding raising via financial institutions (debt funding), where the cost of financing is high, and there could be requirements to place collaterals and guarantees for the financing, the company may be able to raise funding at a much cheaper rates, and without collaterals through the IPO exercise.
3. Unlock potential of the company
As a private owned company, the value attached to the company is always limited because there is no equivalent open market price for this company. Therefore, by going for IPO, the company will need to go through a series of financial, operational and legal due diligence by third party professionals to uncover the full potential of the company. Once the value is endorsed by these professionals, the company is able to unlock its value many times over that of the privately owned company.
Being a public listed company has advantages over many private owned company, where they can have access to bigger and more attractive business potentials. Also, financial institutions and business partners will see them are more credible. Therefore, once the company goes through a successful IPO, the company is deemed to be a “big boy” in its industry, and being a brand in its own right.
5. Succession planning
There are cases where the founders of the company intends to pass on the business to their next generation, but probably unsure if the next generation has interest in their business. Therefore, they would bring the company IPO, and have their family members holding shares of the company. This gives flexibility to the family members to decide whether to retain the shareholding and take over the management of the business, or to sell of their shares for funds to invest or start their own business ventures.
This is Part 1 of the 6 part series in “Initial Public Offering” knowledge articles written by KL Management Services. To find out more about IPO and how your company can start looking into it, kindly visit http://www.klmanagement.com.my.
When analyzing the terms and conditions for a mortgages comparison, there are always a few factors you’ll want to keep in mind. Many people look at mortgages as a necessary evil on the path to owning their dream home. When confronted with a lengthy “Terms of Service” document before signing on that ever-important dotted line, many people don’t bother to read it. Analyzing the terms and conditions properly before the mortgage goes into effect can be a valuable negotiating tactic. If you want to change or talk about any conditions you may find unsatisfactory or predatory, you need to do so before you put your signature on the piece of paper that will ultimately control your financial future for decades to come.
One type of mortgage that is very popular in the United Kingdom is called an “interest only” mortgage. It operates very differently from traditional mortgages, especially those in use in the United States and other areas. With a traditional mortgage, the borrower is making monthly payments that go towards both the original principal amount borrowed and interest that has accrued since the last payment. Depending on the terms and conditions, interest could be accruing as frequently as once per day. When the borrower submits their payment for the month, a portion goes to reducing the principal while the remainder goes towards interest. If the interest is compounded, it is being added to the principal on a regular basis and itself begins to earn interest with each passing month.
In an “interest only” mortgage, the original principal of the loan agreement is not being repaid for the duration of the term. Instead, the borrower is making minimum monthly payments that go towards an investment account. When the account contains a specified amount of money and reaches maturity, the money is then used to pay off the principal. In the United Kingdom, these terms and conditions are frequently associated with traditional investment plans. These types of arrangements are also commonly referred to as an “investment backed mortgage.” Changes to regulations in the UK have tightened the requirements for these types of agreements in recent years due in large part to the financial crisis across the world that began in 2007 and 2008.
When reviewing the terms and conditions of a mortgage agreement, you will discover three different ways in which the property in question is valued. These are the appraised value, the estimated value and the actual value. A licensed professional obtains the appraised value during a visit to the property. The condition of the home is taken into consideration, as are any code violations and other financial stipulations that may be relevant. The actual value is also referred to as the transactional value and describes the purchase price of the property. The estimated value is often obtained in areas where no appraisal can be performed. It is very similar to the appraised value in that it takes into consideration any repairs that may need to be made to the home as well as other financial burdens the homeowner may have.
Depending on the financial institution and your credit rating, you may be required to purchase mortgage insurance at the time you sign your original agreement. Unlike other types of insurance, mortgage insurance isn’t actually designed to protect the policyholder in the event of an emergency. Instead, it is designed to protect the lender in the event that the borrower may default on the loan. Mortgage insurance is typically added into the monthly payment amount along with interest, closing costs and other elements. It is possible to stop paying mortgage insurance after a period of time by refinancing. The money paid by the insurance policy goes towards paying off the original loan in the event of a default.