IPO Initial Public Offerings
Information on Going Public
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How does a company do an IPO ?
We are constantly receiving emails from individuals and companies and
the most common questions are: How to do an IPO with your company?,
how does a company do an IPO?, and how to IPO your
company? Through this article we hope to shed some information on the
steps towards filing for an IPO. We will first discuss the role of the IPO underwriter.
During the pre-IPO process, a partnership is formed between an
investment banking firm and the company that wishes to go public. During
this phase of the process the investment banking firm takes the roll of
an underwriter. An underwriter's job is to provide assistance in helping
the company valuate its assets, price its stock, and disseminate the
first batch of stocks to funds all over the public markets.
This part of the process is so vital that some companies acquire
the services of several investment banks to act as underwriters
for the imminent IPO. When this is the case, one bank will take
the lead of head underwriter, operating as the head of a coalition.
Working together, all underwriters will attempt to gauge market
sentiment in order to adjust the IPO accordingly.
Most typical Investment banks have widespread resources for assessing
how the market will respond to an IPO. Generally, the bank will
engage in a detailed market analysis that shows the trends for similar
companies. Similar IPOs and their performance in the current market
are generally understood to be the best indicator of how current
investors are feeling.
When a company lacks the incredibly broad brand recognition
of something like a Facebook or a Google, a strict financial
analysis tends to be more accurate because investor behavior
will be more rational. When a "big name" player is involved,
there is no telling as to how the public - those who do not
typically invest - will respond.
Investment banks also have access to a wide variety of networks
consisting of mutual funds and, of course, individual venture
capitalists. Although it is not appropriate for a bank to do any
pre-selling of stocks prior to the company's official IPO, it
is possible for them to discover the level of interest that
funds might have in adding that IPO stock to their portfolios
at various price points.
Portfolio managers represent a major source of potential stock
sales, as do venture capitalists that draw on an aggressive
portfolio as part of their fund raising efforts. These sources
can give banks a heads up on how a stock is perceived.
As with anything in the world of finance, predicting
response to an IPO is an inexact science -- one that requires the diligent
development of a total "picture" through a wide variety of sources.
If you want to know how to go public with a company please feel free to
contact us for more detailed information surrounding the process of
becoming a public company..
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