An initial public offering, or IPO, is the very first sale of stock issued by a company to the public. Prior to an IPO the company is considered private, with a relatively small number of shareholders made up primarily of early investors and professional investors.
The public, on the other hand, consists of everybody else – any individual or institutional investor who wasn’t involved in the early days of the company and who is interested in buying shares of the company.
Until a company’s stock is offered for sale to the public, the public is unable to invest in it. You can potentially approach the owners of a private company about investing, but they're not obligated to sell you anything. Public companies, on the other hand, have sold at least a portion of their shares to the public to be traded on a stock exchange. This is why an IPO is also referred to as "going public."
In China, China’s stock market regulator has accelerated approvals for initial public offerings in recent months but market watchers say that long-awaited deregulation of the process is still years away.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. IPO fundraising in Shanghai and Shenzhen has totalled RMB87bn ($13bn) since November, the biggest three-month total since the second quarter of 2015, when China’s stock market bubble reached its height.
The surge of new offerings reflects the relative stability of China’s stock market over the past year. Investors in the secondary market often complain that IPOs “suck the blood” from the market, but recent stability has given regulators confidence that increasing IPOs will not undermine prices for existing shares. The Shanghai Composite Index is up 19 per cent from its 2016 low point in late January last year, though it remains 27 per cent below its level at the peak of the bubble in June 2015.
Tight regulatory control over IPO approvals is an obstacle to new listings in Shanghai and Shenzhen. Some 629 companies were queueing for approval as of January 19, and wait times of more than two years are common. The China Securities Regulatory Commission froze IPOs in July 2015 in an effort to stabilise the market after the bubble began to unwind. They were restarted four months later.
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