Understanding IPO

Understanding the all important concept in terms of KFC and OREO

An Initial Public Offering (IPO) is when a private company offers its shares to the public in a new stock issuance. This allows the company to raise capital from public investors. The transition from a private to a public company can be a crucial time for private investors to fully realize gains from their investment as it typically includes share premiums for current private investors. Moreover, it opens up many financial opportunities for the company, including increased exposure, prestige, and public image, which can help it raise more capital in the future.

For instance, although KFC is part of Yum! Brands and Oreo is owned by Mondelez International, both of which are already publicly traded companies, we can consider a hypothetical scenario where a popular brand or division not previously public decides to go for an IPO. If KFC or Oreo were to execute an IPO, they would prepare by first getting approval from the Securities and Exchange Commission (SEC), then they would decide the number of shares to be issued and at what price range. This process typically involves roadshows to gauge investor interest and to finalize the IPO price based on the market's demand for the stock.

Neither KFC nor Oreo has had an IPO as individual entities because they are subdivisions of larger corporations that are already public. However, discussing these brands in the context of an IPO helps illustrate the process and the strategic financial management involved in taking a company public. For companies that do go through an IPO, it marks a significant phase of growth, opening up opportunities for expansion and competitive advantage