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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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