IPO-Initial Public Offerings Stock

An initial public offering (IPO) referred to simply as an “offering” or “flotation,” is when a company (called the issuer) issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.

In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market.

An IPO can be a risky investment. For the individual investor, it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value.

The advantage and disadvantage of IPO

Advantages

• Raise funds
• Good circulation
• Establish a reputation
• Return the input of individuals and venture capital

Disvantages

• Cost (possibly up to 20%)Companies must comply with SEC regulations
• Stress management
• Wall Street’s short-sighted
• Loss of control of the company

The general process of IPO In USA

1. Establish an IPO team
1. CEO, CFO,
2. CPA (SEC counsel)
3. Counsel
2. Selection of underwriters
3. Due Diligence
4. Preliminary application
5. Roadshow and pricing

Each participant’s role in IPO

Companies and their directors
Prepare and revise earnings and cash flow projections, the prospectus approved and signed the underwriting agreement, road shows

Sponsors
Arranged schedule, coordinating consultants, prepared a draft prospectus and the listing application, the proposed stock price.

Reporting Accountant
Completion of audit services, to prepare accounting reports, review of profit and working capital forecasts

Corporation Counsel
Arrangements for corporate restructuring, review of relevant legal confirmation to determine the underwriting agreement

Sponsor lawyer
Consider the company’s organizational structure, review the prospectus, the preparation of the underwriting agreement

Stock Exchange
Listing application and prospectus review, hearing

Shares Registrar
Check stock and repayment of fiction, a lot of printing stocks

Printers and translators
Drafting and translation of public materials, large print listing document

The basic demand of Middle Small Business to IPO

1. Issue should insist on open, fair, impartial, efficient, economic principles, to maintain financial order and stability and social security.

2. The main choice for issuers, underwriters and distributed to the drafting of distribution programs (including the issue of cost budget table).

3. Before the stock issue, the lead underwriter is responsible for the development of the press release published notice. Issue Notice to be issued contained manner, time, location and related matters.

4. In the sale period, the underwriter shall postor and publish a prospectus and the issuance announcement.

5.After the stock issuance, underwriters should release immediately  the results.

nvestopedia explains Initial Public Offering – IPO

IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.

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