BROWSE

Initial Public Offerings – IPO

Initial Public Offerings - IPO

IPO or Initial Public Offering refers to the first stock sale made by a private organization to the public. This move is typically used by small companies that require funds in order to expand operations, but it is not uncommon for larger companies either especially those that wish to reach the public.

The process is simple enough. In an IPO, the issuer gets aid from an underwriting company in determining whether it should issue a preferred or a common security along with the best price and the time it should be introduced into the market.

Issuing shares via IPO is one of the main reasons the stock market exists. It allows companies to increase capital so that they can expand operations, allow investors to cash out or create common stock to get rivals. They can also sell some of the shares later if they wish to. This is known as the primary market and it occurs when an investor purchases stock straight from a company.

However, a secondary market is more common and it occurs when several investors make trades between themselves using shares they acquired from a company.

How a Company goes Public

Getting a company through to its Initial Public Offering takes a lot of time and money. Besides overcoming regulations, the company has to contend with public scrutiny along with the oversight of the SEC or Securities and Exchange Commission.

If you wish to take your company public then it would be best to hire an underwriter to help you through the process along with services from an investment banking company that can take care of most of the grunt work. The result will be a preliminary prospectus which you can present to investors and the SEC.

This is called a 'red herring' in the stock market and this will be your final prospectus or the final legal document that can facilitate the IPO process. One of the most important documents in this is the S-1 form which is basically the legal registration statement. A well made prospectus will outline what your company does, why it is issuing shares via an Initial Public Offering and the type of ownership on offer to investors in clear terms.


Further Reading


Initial public offerings: International insights
www.sciencedirect.com [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …

The economic determinants of auditor compensation in the initial public offerings marketThe economic determinants of auditor compensation in the initial public offerings market
www.jstor.org [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …

Empirical analysis of the economic demand for auditing in the initial public offerings marketEmpirical analysis of the economic demand for auditing in the initial public offerings market
www.jstor.org [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …

Pricing initial public offerings: Further evidence from GermanyPricing initial public offerings: Further evidence from Germany
www.sciencedirect.com [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …

Underperformance in long-run stock returns following seasoned equity offeringsUnderperformance in long-run stock returns following seasoned equity offerings
www.sciencedirect.com [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …

Underpricing, ownership and control in initial public offerings of equity securities in the UKUnderpricing, ownership and control in initial public offerings of equity securities in the UK
www.sciencedirect.com [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …

Earnings quality at initial public offeringsEarnings quality at initial public offerings
www.sciencedirect.com [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …

Technological innovation and initial public offeringsTechnological innovation and initial public offerings
academic.oup.com [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …

Artificial neural network models for pricing initial public offeringsArtificial neural network models for pricing initial public offerings
onlinelibrary.wiley.com [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …

Unit initial public offerings: A form of staged financingUnit initial public offerings: A form of staged financing
www.sciencedirect.com [PDF]
… Asian countries to reduce regulatory interference in the setting of offering prices should … k'u_r NV&S: Going public; Equity issues; Investment banking; Initial public offerings … and Technology, Korea University, London Business School, the London School of Economics Small Firm …



Q&A About Initial Public Offerings – IPO


How does an IPO work?

The process of going through an IPO involves several steps. First, you need to make sure your company meets all necessary regulations and requirements before you can even think about going public. Then, you have to create a prospectus which will be presented to investors and the SEC (Securities and Exchange Commission).

What are some reasons why a company would want to go public?

A company may decide they want to go public if they need more capital in order for them expand their operations or if they want access to investors so that they can cash out on their shares or create common stock in order get rivals. They can also sell some of their shares later if they wish.

What is a red herring?

A red herring is what happens when you present your preliminary prospectus which will be used during the actual initial offering period where you present your final prospectus along with other documents required by regulators such as audited financial statements and information about officers, directors, etc...

Who should I hire when I am ready for my company's initial offering?

You should hire underwriters as well as investment banking services from a reputable firm like Goldman Sachs who can take care of most of the grunt work involved with taking your company public.

What is an IPO?

An IPO or Initial Public Offering refers to the first stock sale made by a private organization to the public. This move is typically used by small companies that require funds in order to expand operations, but it is not uncommon for larger companies either especially those that wish to reach the public.