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.


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.

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  1. 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 ... Read Full Answer >>
  2. 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. ... Read Full Answer >>
  3. When did Facebook go public?

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  4. Do hedge funds invest in private companies?

    Hedge funds normally do not invest in private companies because of liquidity concerns. Capital funding for private companies ... Read Full Answer >>
  5. Do you discount working capital in net present value (NPV)?

    Net present value (NPV) calculations should include the discounted value of changes in working capital. This treatment of ... Read Full Answer >>
  6. How is working capital different from fixed capital?

    There are several key differences between working capital and fixed capital. Most importantly, these two forms of capital ... Read Full Answer >>

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