Critically evaluate the following statement : "The ultimate objective of an IPO is to maximize the wealth of the promoters rather than raising funds."

The primary objective for an Initial Public Offer (IPO) is to raise funds for the company. The equity shares of the company get listed on Stock exchange after the IPO. The promoters are required to contribute the initial capital and such shares are issued to the promoters at par. The promoters hold the majority of shares of the company even after the IPO. Over the period of time, the floating stocks of the shares from retail and small shareholders move to large and institutional shareholders. As a result of decrease in the floating stock of the shares in the secondary market of the Company, the market prices of the equity shares appreciate and move up. The largest beneficiaries after the IPO are the promoters of the company as their initial investment gets multiplied several times. Hence the end result is that promoter's wealth gets maximized.