In modern business, company growth is not only based on operational success, but also on the ability to provide capital for new development steps in a timely manner. As business expands and opportunities and ambitions become greater, companies increasingly use the opportunities offered by the capital market. It connects companies looking for funds for further development with investors who want to participate in their growth.
Stock exchanges play an important role in this process, as regulated and transparent markets where securities, such as shares or bonds, are traded. Examples of well-known stock exchanges include the New York Stock Exchange (NYSE), the Zagreb Stock Exchange (ZSE) or the Frankfurt Stock Exchange (DAX).
Therefore, terms such as IPO, recapitalization, EBITDA, etc. are mentioned ever more frequently. You may have heard them in the media, on social networks, or during conversations at work. But what exactly does that mean and how does it affect you even if you are not involved in finance?
What is an IPO?
IPO (Initial Public Offering), i.e. the initial public offering of shares, marks the moment when a private company goes to the stock market for the first time and makes its shares available to the public and changes from a private to a public joint-stock company.
This is an important step in the development of the company, because it opens up the possibility of raising capital from investors through the sale of part of the ownership. In other words, the company that was previously owned by the founder and private investors becomes available to the capital market.
What are shares?
A share is a financial instrument that represents an ownership interest in a joint stock company. A person who owns a share becomes a shareholder and thereby acquires certain rights, such as the possibility of participating in profits, voting rights at the General Assembly, depending on the type of share, and the possibility of selling the share on the stock exchange at market value. When a company conducts an IPO, it makes its shares available to the public for the first time and changes from a private to a public joint stock company.
What is EBITDA?
EBITDA is an indicator used to evaluate a company's operational performance. The name comes from the term Earnings Before Interest, Taxes, Depreciation, and Amortization, and refers to profit before interest, taxes, amortization, and depreciation. For investors, this indicator is important because it helps to see more clearly the basic strength of the business and enables an easier comparison between companies, regardless of their financial structure or the specifics of the industry.
Once a company is listed on the stock exchange, there may be a need for new capital raising or for an additional increase in the number of shares available to the market. One of the ways to do this is SPO.
What is an SPO?
Simply put, an SPO (Secondary Public Offering) is a secondary public offering of shares after the company has already gone public. Unlike the IPO, which represents the company's first entry to the capital market, the SPO is carried out when the company is already listed on the stock exchange and investors can already trade it.
An SPO can have multiple goals. The company can use it to collect fresh capital for further growth, investments, business expansion, debt reduction or financing of new projects. In some cases, it can also serve for existing shareholders to sell part of their shares to the wider investment public.
It is important for employees and the general public to understand that an SPO is not a sign of company weakness. On the contrary, it often shows that the company wants to use the capital market as a tool for further development, strengthening the balance sheet and financing new business advances.
How does the SPO work?
With an SPO, a company or existing shareholders offer new or existing shares to investors, under pre-defined terms. Since the company is listed on the stock exchange, the market already knows its value, performance, and trading history, so investors make their investment decisions based on the information already available, along with additional documentation related to the offering itself.
The price in an SPO is usually determined by taking into account the market price of the share, investor demand, and the objectives of the offering itself. Oftentimes, the price in an SPO is set at a certain discount compared to the market price at the time, in order to make the offering attractive to investors.
Conclusion
An SPO is any subsequent public offering of shares coming after an IPO, when a company is already listed on the stock exchange. Therefore, an SPO does not mark the first entry to the market, but rather a new phase of financing or a change in the ownership structure of an already listed company. It is an important capital market instrument that allows companies to obtain additional financing and continue to grow even after they become publicly listed.
It is important for employees and investors to understand that an IPO is not the only major step in the life of a company on the stock exchange. Other phases may follow an IPO, and an SPO is just one of them – a step in which a company uses open access to the capital market for a new chapter in its development.