CHAPTER 1
INTRODUCTION
1.1 Background
At
some
point
during
their
period
of
operations,
a
company
will
be
burdened
by
the
need of more
capital,
and
to
be
financially
liquid.
In
order
for a company
to
be
able
to achieve
its goals, this need for capital
factor has to be fulfilled.
Most of the time, a
company
cannot
raise
their
capital
due
to
limitations
to
their
internal
infrastructure
and will
need external
help
in order to gain financial
liquidity.
One of most common
ways for
large
private
firms
to
gain
capital
externally
is
to
go
public,
by
offering
an
Initial
Public
Offering
(IPO).
An
IPO
is
a
private
firm’s
attempt
to
sell
its
stock
to
the public for the very first time.
With the current growth and development
of Indonesian
capital markets, going
public
could
be
one
of
the
alternatives
to
gain
capital
for
company
who
needs
more
financial
investments.
Capital
market
is a place
where
buyers and sellers
will
indirectly
meet
to
do
a financial
transaction
(Kasmir,
1998).
Investors
with
excess
money
will want to invest
in capital markets
in hopes that they will
gain returns
from
their
investments.
Capital
markets
have
an
important
role
to
play
as
an
intermediary,
between
the
investors
looking
for
profitable
ventures,
and
the
companies
who
are
seeking
additional
capital.
Capital
markets
are
separated
into
two
divisions,
primary
market
and
secondary
market.
It is in
the primary
market
that companies
offer
their
shares for the first time.
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