The company you work for has a number of projects that require substantial investment over the next three years. The company is currently privately held by a small number of investors. The group can no longer be counted on to supply the foreseen equity needs over the next three years. They asked you the financial manger to look into raising the new equity financing needed by going public. Currently the financial market place that has moderate interest rates and stock prices that appear high to the underlying cash flows being generate.

You need to first explain the process that the company will have to go through to achieve raising the money through an IPO.

What are the risks that the company faces by going public with its need for equity?

It appears from this article IPO that not all IPOs are winners.Can you understand why a company would choose to go public even when not profitable?

IPO Market Has Never Been This Forgiving to Money-Losing Firms

Money-losing companies are going public at a record rate as investors hunger for new issues

Stock investors are welcoming money-losing companies into the public markets this year with open arms.

About 83% of U.S.-listed initial public offerings in 2018's first three quarters involve companies that lost money in the 12 months leading up to their debut, according to data compiled by University of Florida finance professor Jay Ritter. That is the highest proportion on record, according to Mr. Ritter, an IPO expert whose data goes back to 1980.

Some analysts and market watchers are concerned. They see similarities with the dot-com bubble of nearly two decades ago that left many investors with enormous losses. The prior high-water mark for money-losing companies going public was 2000, when 81% of stock-market debutantes were unprofitable, according to Mr. Ritter's data.

Kevin Landis, chief investment officer of tech-focused Firsthand Capital Management, said he is wary of money rushing into unprofitable companies. "The lesson from 2000 is don't chase what everyone else is chasing," he said.

There are differences from back then. By one measure, the current class of technology IPOs is in a bit better shape than that of the dot-com era: In 2000, just 14% of tech companies listing shares in the U.S. were profitable, compared with 19% so far this year, according to Mr. Ritter's data.

And the warm welcome today is being extended to more than just money-losing internet and tech companies. A surge in biotech offerings has pushed up the current tally of newly traded companies without earnings.

Investors' tolerance for red ink has been rewarded so far in 2018. Stocks of money-losing companies listing in the U.S. soared 36% on average from their IPO price through Thursday. That is better than the 32% return for IPO stocks with earnings and the 9% gain for the S&P 500 index.

This past Wednesday, online-survey provider SurveyMonkey's parent SVMK Inc., which hasn't had a profitable year and posted a $24 million net loss in 2017, jumped more than 40% in its debut after pricing above its targeted range. Shares of Tilray Inc., an unprofitable Canadian cannabis retailer that is one of the few pot companies listed in the U.S., soared more than 800% since its Nasdaq debut this summer.

Meanwhile, biotechnology company Solid Biosciences Inc., which hadn't yet generated revenuelet alone earningsinformed the market ahead of its January IPO that one of its clinical trials was put on hold. Investors ignored that potential red flag and the company raised $144 million. Its stock has nearly tripled since then.

Helping explain investors' hearty appetite is that, even with the uptick in IPO volume, the number of public companies overall has been in historic decline and many of the hottest startups of recent years, such as Uber Technologies Inc. and Airbnb Inc., are staying private longer. As a result, there has been a feeding frenzy around companies that do go public, as many of them have outsize growth prospects.

Mr. Ritter's figures exclude companies that don't list on major exchanges, real-estate investment trusts, and blank-check companies, which typically use the money raised in an offering to acquire assets.

Many of the companies with negative earnings that listed shares during the dot-com era, such as internet-services provider Genuity Inc. and Viasystems Group Inc., a maker of circuit boards, didn't live up to their promise; both companies filed for bankruptcy protection in 2002.

Mr. Landis of Firsthand Capital Management said some companies may be more eager to go public without earnings rather than wait until they have small profitsand a lopsided price-to-earnings ratio, something he refers to as the valley of death.

Not all IPO stocks have fared well lately. ADT Inc., which priced well below the middle of its initial target range in January, fell 12% in its first day of trading and now the security company's shares are down more than 30%.

Among big money-losing companies to go public in recent years is Snap Inc. The Snapchat parent's stock, which made its debut early last year, is down by roughly half from its IPO price as growth has disappointed investors and it suffered an exodus of key executives.

"The problem with young growth companies where investors have built in really optimistic assumptions is if the company doesn't deliver, it can get revalued in a heartbeat," Mr. Ritter said.

For now, investor fear of missing out on a rally is trumping such concerns, as major stock indexes trade near records.

Zander Lurie, chief executive of SurveyMonkey 's parent, said investors were likely willing to overlook the company's net losses because it has strong cash flow. Profitability for the 19-year-old company is still likely several years away, he said in an interview.