A floatation is a process when a new company or an existing private limited company becomes a public limited company by issuing shares to the general public. A floatation takes a company public by listing it on a stock exchange, and involves issuing a prospectus to outline what the company’s strategy is and what the business plans to do with the funds it raises by issuing shares to new investors.
Businesses can often raise large amounts of equity through a floatation. Without these funds, companies may be forced to use retained earnings or seek large amounts of debt to fund expansion plans. The private owners of a company float a business by undertaking an initial public offering (IPO), and often do this in order to exit their investment and transfer ownership to the public.