BENEFITS OF IPO, DECIDING ON AN IPO AND IPO PROCESSES
There are various reasons why a company should consider an IPO. First of all, companies benefit from a significant source of funding by opening up to the public and allowing their shares to be traded in an organized market.
Source of Financing
Companies offering their shares at worthy price benefit from using non-refundable source at a lower cost than alternative financing methods.
Public offering primarily provide companies the opportunity to obtain capital through a reliable organized, transparent market structure. Compared to other alternative financial sources like borrowing method, public offering does not have principal and interest-like repayment obligations that will force cash flow of companies. As the debt ratio of a company increases, the capacity to borrow more resources decreases while the capacity of borrowing increases as the capital structure increases so that the financing becomes both easier and cheaper.
In addition, by using their shares as a guarantee companies can obtain credits and issue debt securities after they are opened to the public and shares start to be traded on the Exchange.
The shares offered to the public can be bought and sold in a transparent manner at the prices determined according to the market supply and demand at an arbitrary time, liquidity is provided to the shares and an important opportunity is provided to existing shareholders. On this basis, the shareholders of the company can also use the shares traded in the stock exchange as collateral in their credit transactions and convert this idle asset into financing creation tool. The formation of the company's share price in the market creates a reference to the value of the company in merger, acquisition or secondary offering activities.
Various information about the companies whose shares are traded on the Exchange are constantly being delivered to the foreign investors through global press, data broadcasting and other visual broadcasting organizations within the framework of the transparency of the Exchange and the function of public disclosure.
The aforementioned information dissemination provide companies and their products to be recognized both locally and globally. Within the framework of the advantages gained by global recognition, it becomes possible to easily corporate with companies operating in the domestic and foreign countries from the same sector and also to work in similar fields by forming joint ventures.
The characteristic feature of most companies operating worldwide is having primarily a family business identity. This can often lead to the fact that the life of the company is limited to the life of family members who have control in the founder or management.
The public offering of shares of companies and the commencement of transactions in the Exchange are realized within a process including the examinations of Capital Markets Board and Borsa İstanbul. In addition, after company shares start trading, financial statements continued to be audited by independent auditors at certain periods, the shareholders and the company are regularly informed and subject to the continuous supervision of CMB and Borsa İstanbul.
By opening up to the public and ensuring that shares are traded in Borsa İstanbul, companies can institutionalize and internalize management principles in a shorter of time period within capital market discipline by exposing their financial and other important information to the public by regularly and timely reporting, being exposed to the interest and supervision of investors and their partners. Institutionalization of the structure and strengthening of the organization of the company contributes to its success and continuity without the founding shareholder group or to the independence of the founding family.
Companies can create financing opportunities not only with the primary public offering but also with "Secondary Public Offerings" according to the resource requirements arising from their investment and similar needs while restricting the pre-emptive rights of existing partners.
The inadequacy of capital accumulation in developing countries affects the economic development process of those countries in negative way. In this context, companies are struggling to find the capital needed to grow, develop, invest and compete with their competitors in the globalizing world. The contribution of the capital market financing to the solution of the resource problem of companies worldwide has become more and more important in recent years.
Listing their shares in the Exchange, companies increases their credibility in banking and money market which enables to obtain loans cheaper and easier.
By trading on Borsa İstanbul markets, companies become subject to media news and analysis, as well as investment reports from the investment institutions. In the framework of the transparency principle of stock market and function of public disclosure, detailed information about listed companies is distributed to the domestic and foreign investors through exchange bulletins, data broadcasting companies, media organizations and public disclosure platform. Companies’ financial and other important data can be tracked by investors as well as creditors, suppliers and business partners. Reliable, regular and ongoing information about the company will increase the recognition of the company in the financial market and in its sector. Listing becomes beneficial for financing, marketing and selling products or services, providing qualified human resources and establishing business partnerships.
With the commencement of trading of shares of companies in Borsa İstanbul, companies can further easily issue same capital market instruments and ensure listing in other countries by quoting their capital market instruments which makes Borsa İstanbul a gateway for those companies to reach global markets.