That determines how serious the company is about creating wealth for the shareholders. This is an acid test of an IPO. Typically, IPOs are raised for a variety of reasons. The most common reason for an IPO is for investment in plant and machinery. That is understandable depending on the ROE that the company has been generating. Then there are companies that use IPO proceeds to defray their high cost of debt. This is good as long as the company can reduce overall cost of borrowing. Replacing debt with equity is not the answer. Thirdly, there are companies that use IPO funds for the sake of working capital and you need to be slightly wary as it can lead to an asset liability mismatch. Lastly, be cautious of companies that are likely to use the proceeds for acquiring large parcels of real estate and offices. These are normally the least productive of assets.