IPO-Initial Public Offering

IPO is the abbreviation of Initial Public Offering which implies the first offer for selling stock by a private company or corporation to the public. IPOs are mostly issued by younger, smaller companies who seek capital for expanding. IPOs can also be issued by those large private companies in attempt for becoming publicly traded. In case of an Initial Public Offering, the issuing company may seek and obtain the help of an underwriting firm that helps in determining what type of security is to be issued (whether common or preferred), the time of introducing the IPO in the market, and the best price to offer the IPO.

IPO is also sometimes referred to as public offering. Investing by buying IPO is quite a risky investment. For those investors who fall in the category of individual investor, it becomes difficult to predict what the stock will be doing on the initial trading day and in the coming days. This often requires little historical data about the company in order to analyze the company.

Almost all IPOs are offered by those companies which are passing through a transitory growing phase. For this reason the IPOs are subjected to additional uncertainty about their future value. A company while goes for issuing IPOs needs to list its shares on a public exchange. This is known as a company’s reasons for listing. The company looks for issuing extra new shares so as to raise additional capital simultaneously. Once a company gets listed, it can issue additional shares by using the rights issue, thus again offering capital to the company for expansion, free from falling prey to any types of debts. For knowing more on listing reasons about IPOs, then check our page on Reasons for Listing.

The procedure of IPOs usually takes one or more investment banks in the role of “underwriters”. Those companies who offer their shares are called as the “issuer” and they enter a contract along with a lead underwriter for selling its shares to the public. Then the underwriter goes to the investors with selling offers of the shares. There are basically five common methods in which the sale of the shares can take place. The page on IPO Procedure will enhance your knowledge more on the selling procedure of IPOs. In case of large IPOs a “syndicate” of investment banks is mostly the underwriter. Multinational IPOs can have even three syndicates for dealing with different types of legal needs in the domestic market of the issuer as well as in other areas.

The other important steps involved in IPOs and their selling are: Business Cycle, Auction, and Pricing. According to the history of IPO, there are two time windows that are commonly referred to as “quiet periods”. These periods were of great significance in IPO history.