Industrial and Commercial Bank of China (ICBC)
a) An Initial Public Offering (IPO) happens when a publicly-listed company floats its shares on a stock exchange for the awfully first time. For example, ICBC floated its shares in both Hong Kong and Shanghai.
b) Two explanations necessary for full marks, such as:
- The major benefit of issuing shares in a company is the possible to raise a huge amount of capital. In the case of ICBC, it was able to increase almost $22 billion, considerably improving its cash flow.
- The extra source of finance would permit the Chinese bank to compete against more established global banks such as HSBC and Citibank, especially as it would be able to expand its operations beyond China and within.
- In addition, 'going public' let a business to have the protection of limited liability.
c) Investors in the stock market tend to obtain for the medium to long term. Given that ICBC is China's biggest lender, this may have endowed with enough reason for investors to pour money into the company. With China's sustained and rapid economic growth, confidence levels in China and ICBC may have led to the influx of investment funds. Presumably, investors felt optimistic about the productivity of ICBC. There is, after all, a positive correlation between a dividend payout and firm's profitability and its share price