Capital Structure Considerations

Window of Opportunity

In corporate finance, a "window of opportunity" is the time when an unattainable asset or product becomes available. It can be extended to a time when a certain product becomes attainable at a certain price or, from the opposite perspective, the unique time a party will be able to sell a certain product at its highest price point in order to get a maximum return on investment.

For example, when a firm issues an IPO, it allows it to tap into a wide pool of potential investors to provide itself with capital for future growth, debt repayment, or working capital. A company selling common shares is never required to repay the capital to its public investors. Those investors must endure the unpredictable nature of the open market to price and trade their shares.

However, for a company with massive growth potential, the IPO may be the lowest price at which the stock is available for public purchase. Therefore, the IPO presents a window of opportunity for the potential investor to get in on the new equity. At the same time, it is still affordable, and a greater return on investment is attainable. From the firm side, purchasing a new plant or real estate at a cheap cost or lower lending rates also presents an opportunity to attain a greater investment in assets used in production. The management of a firm must consider this to keep costs low and returns high and to make the firm look like the best possible investment for creditors of all types.

Twitter at the New York Stock Exchange: A Twitter banner hanging over the New York Stock Exchange on the day of its IPO.