NARRATOR: Joe started the company Joe's Games five years ago and received money from three friends to cover various costs, giving them shares in return, a fairly typical private company scenario. Two years later, Joe's Games got additional funding from two angel investors who obviously received shares in exchange for their money. But Joe's Games was still considered a private company. Nowadays, another three years later, Joe's Games is a respected brand in the gaming community. Therefore, the shareholders decide it's time for an initial public offering, or IPO, which basically means that through a new stock issuance shares of a private company will be offered to the general public, and as such, the company goes from private to public.

Some of the pros are, 1, a lot of capital can be generated by tapping into a huge money pool. 2, the share price is usually set at a value which makes current shareholders happy, enabling them to sell at least some of their stocks at a good price and lock in some well-deserved profits. 3, more money can be raised through additional rounds of funding. 4, the brand is strengthened as IPOs can provide a solid credibility boost. There are, of course, cons as well, such as, 1, the SEC and exchanges have strict requirements when it comes to issues like transparency. So public companies have to disclose a lot of business-related information, which is not just an additional hassle but might even help competitors gain access to what used to be company secrets.

2, less control since new shareholders with voting rights will emerge. 3, less freedom and more rigidity now that you're in the proverbial spotlight with, for example, decision making through the board of directors being, let's just say, more difficult than back when the company was private.