Trucker Life, Money, Jobs, and Humor

An IPO is an initial public offering of a companys stock. This is done either to raise capital for a new company or for an existing company to simply offer shares of stock for the first, known as going public. In either case, there is a certain set of steps in the IPO Process that must be followed.

The first thing a company must do before issuing stock is file a registration with the Securities and Exchange Commission (SEC.) Since the SEC has the power of nullifying any attempt to go public, a companys statement must be thoroughly accurate. Data concerning the financial health of the company must be entirely truthful. Due diligence should be the order of the day. Putting a company out onto the IPO Market is serious business. Every step in the IPO Process must be done carefully.

After (and sometimes before) the registration statement is finished, companies engage the services of one or more investment bankers. The role of any investment banker(s) is mostly twofold. First, it is to distribute the companys prospectus to prospective buyers of the stock. The prospectus is a legal document that details among other things the companys market, financial statements, executive biographies, and a projected price range for the stock. It is sometimes referred to as a red herring. It is so named because on the cover of the prospectus, and in red ink, is a notice from the SEC that the companys stock may not be bought or sold until the registration statement has been approved.

The second purpose of the investment bankers, or underwriters, is to buy the companys stock and then resell the shares to the public. Generally, a road show, takes place. Here the company executives and investment bankers promote the stock to possible investors by detailing company strategy.

Since a company is selling stock to an underwriter instead of directly in the marketplace, such as the New York Stock Exchange, they are mitigating their risk in the market. Further, they are able to receive their monies upfront and do not have to incur costs of promotion. The downside for the company is that it forfeits the chance of higher stock prices that could have been created by the market.

Sales to the underwriter cannot happen until the SEC has approved the registration. Upon approval, and typically the day before the public offering, company executives and investment banker determine how many shares to sell and what the price will be. When the exchange has been made between the company and the underwriter of funds and stock, the offering is complete.

Underwriters carefully look into a company before deciding to purchase securities. Before taking the risk, they want to feel confident that the value of the stock will be higher than what they paid for it. The potential exists for great profit but also for great loss.

Needless to say the IPO process, though fraught with risk for the investment banker, represents an exciting and hugely profitable opportunity. Just imagine if you were in a position to buy low the stock of the next high-tech giant.

We are a tax and advisory firm, as part of an international network under one name. We act with integrity and always strive to achieve professionalism. If you want to know how to IPO or the IPO How, we have the people with the expertise.

Charlotte Bankruptcy Lawyer