IPA IP 2023 Question 28
A question IPA Japan published in 令和5年度 ITパスポート試験 公開問題 問28, translated into English. ITPEC is based on the same exams.
Company A, a venture company that develops AI, is going to be listed on a financial instruments exchange for the first time for the purpose of raising funds. Which of the following is the most appropriate term that represents newly offering a company’s unlisted shares to the public in this way?
Explanation
IPO — an initial public offering: a company lists its shares on a stock exchange for the first time and offers them to the general public.
Before an IPO the shares are held privately, by the founders, employees and venture capital. Through the IPO the company raises funds by issuing new shares to investors, the shares become freely tradable on the exchange, and the company takes on the disclosure duties of a listed company. Early investors often sell part of their holdings at this point.
Answer (a)
Why not others:
- •(b) LBO — a leveraged buyout acquires a company with money borrowed against the target company's own assets and future cash flow
- •(c) TOB — a takeover bid publicly offers to buy a company's shares from its shareholders at a stated price and period, usually to gain control
- •(d) VC — venture capital invests in unlisted start-ups and typically recovers its investment when they go public
Key rule: IPO is going public for the first time; LBO and TOB are ways of acquiring a company, and VC is an investor that often profits from an IPO.
Corporate Activities · AI-written, may contain errors
This question comes from the past questions IPA Japan publishes, translated into English by ITPEC Practice. ITPEC Practice is an independent study tool and is not affiliated with IPA or ITPEC. See the original paper (PDF) or Report an issue.