IPOs have hit the headlines recently, with Chinese internet trading company Alibaba taking the plunge last week (and sparking a Wall Street frenzy in the process), Jimmy Choo stating its intention to list shares on the London Stock Exchange yesterday, and Zalando considering shortening the subscription period for its IPO due to strong demand.

So when should a company decide to go public? And what are the benefits and drawbacks of doing so?

Going back to basics, an initial public offering (IPO) refers to the first sale of stock by a private company to the public.

IPOs can be undertaken by both small or young companies seeking to raise capital and large, well-established companies.

They certainly can be an excellent way of generating capital, with the most successful IPOs, including those of Facebook, AT&T Wireless, and Visa, generating billions.

However the process itself is expensive and time-consuming. In fact, companies can expect the underwriting fees and related costs to set them back around 10-20% of the total funds generated.

That said, IPOs can be good news for investors, since public companies are monitored much more closely that private ones.

But, of course, all that extra scrutiny means that paying taxes becomes much more complicated, that required disclosures will increase, and that a whole of host of additional SEC requirements will be applied to the company’s executives.

Still, the biggest shift is perhaps the CEO’s loss of autonomy. Once floated, the will of the shareholder becomes a powerful and unignorable force in terms of setting the company’s direction.

And with their eyes on immediate returns, shareholders are susceptible to prioritising short-term objectives over long-term ones.

In short deciding whether or not to float is always a complicated process; with issues going well beyond those I’ve covered here.

The benefits could be great; the drawbacks, catastrophic.

After undergoing such a fundamental structural change, it’ll be interesting to see how Alibaba, Jimmy Choo and Zalando modify their behaviour in the next few years (if they do at all).