2. Advantages and disadvantages of IPOs

An initial public offering (IPO) refers to the first sale of a companys stock to the public through the stock market. Once a company launches its IPO, it changes from a privately held company to a publicly traded company.

Visa, AT&T, Kraft Foods, UPS, CIT Group, Conoco, The Blackstone Group, Travelers, Goldman Sachs, and Agere Systems are among the firms considered to have issued the largest IPOs in U.S. history, each selling for more than $3.5 billion. These companies, along with thousands of other companies whose stock trades in equity markets across the globe, reap the benefits of going public.

The following table describes some advantages and disadvantages of going public in the United States. Identify whether each description is an advantage or a disadvantage of going public from the perspective of a company and its owners.

Description	Advantage	Disadvantage
Company founders can sell their stock to the public and diversify their investments, reducing risk in their personal portfolios.
Managers of a publicly traded company cannot easily engage in self-dealings or use company funds for expensive perks.
It is easier for a publicly traded company to facilitate merger negotiations with an established market price as compared to a privately held firm.
Once a company goes public, its exposure to proxy fights and tender offers increases, and managers have to work harder to maintain control.