Flotation

AAA

DEFINITION of 'Flotation'

The process of changing a private company into a public company by issuing shares and soliciting the public to purchase them. Flotation allows companies to obtain financing from outside the company instead of using retained earnings to fund a new project or expansion. The term "flotation" is commonly used in the United Kingdom; the term "going public" is more widely used in the United States.

INVESTOPEDIA EXPLAINS 'Flotation'

Flotation requires careful considerations regarding timing, company structure, the company's ability to withstand public scrutiny, increased regulatory compliance costs and the time involved in effecting the flotation and attracting investors. While flotation provides access to new sources of capital, flotation costs - the expenses associated with issuing new stock - must be accounted for when consider the switch from private to public company. Flotation costs mean it is more expensive to finance a project with new shareholder capital than with retained earnings.



RELATED TERMS
  1. Corporate Finance

    1) The financial activities related to running a corporation. ...
  2. Impact Day

    The date on which a corporation makes a secondary offering of ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  4. Private Equity

    Equity capital that is not quoted on a public exchange. Private ...
  5. Direct Public Offering - DPO

    When a company raises capital by marketing its shares directly ...
  6. Lloyds Organizations

    An insurance syndicate that bases its organizational structure ...
Related Articles
  1. Investing

    In an IPO, who is a greensheet distributed to and for what purpose?

    One of the most talked about documents that arises in the process of introducing a new issue is the greensheet. This is an internal marketing document prepared by the underwriter and intended ...
  2. Mutual Funds & ETFs

    Investing In IPO ETFs

    Learn the history, rules and risks of investing in IPO exchange-traded funds.
  3. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  4. Investing

    How An IPO Is Valued

    The initial valuation of an IPO can determine the success or failure of a specific stock - but how is that price determined?
  5. Personal Finance

    The Ups And Downs Of Initial Public Offerings

    Initial public offerings aren't the best option for every company. Consider these factors before "going public."
  6. Options & Futures

    Greenshoe Options: An IPO's Best Friend

    Find out how companies can save or boost their public offering price with these options.
  7. Entrepreneurship

    What does 'going public' mean?

    Going public refers to a private company's initial public offering (IPO), thus becoming a publicly traded and owned entity. Businesses usually go public to raise capital in hopes of expanding; ...
  8. Investing Basics

    How Does Alibaba Make Money? A Simple Guide

    Alibaba broke IPO headlines--but making news and making money are two different things.
  9. Investing Basics

    How do capital expenditures affect (CAPEX) the valuation of a company?

    Learn the effects that capital expenditures, or CAPEX, used for maintenance and growth have on a company's revenue, profits and valuation.
  10. In 2014, stock markets traded at record levels and the US IPO market enjoyed activity not seen since the 2000 tech bubble. Here is a snapshot of some of the year’s most successful IPOs.
    Investing News

    5 IPOs That Broke The Markets In 2014

    In 2014, stock markets traded at record levels and the US IPO market enjoyed activity not seen since the 2000 tech bubble. Here is a snapshot of some of the year’s most successful IPOs.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center