In order to raise capital, corporations sometimes decide to sell ownership
shares in the business to the public at large. This is referred to as an initial
public offering, or IPO. When a company goes public, everything is
impacted, from decision making to record keeping. For example, certain
company decisions that might have been privately discussed and decided
must now be disclosed and approved by shareholders. Federal and state
laws pertaining to record keeping and disclosure requirements must be
adhered to, and financial information about the company will now be
available to the public—including profits and executive compensation.
Regulation of the sale of securities began after the infamous stock market
crash of 1933 in order to minimize fraud and to ensure that investors have
accurate financial information about the company.
Going public is a complicated, lengthy, and expensive process. Your
textbook and the supplemental material in the module provide you with an
