IPO Initial Public Offerings

                                                                                          Information on Going Public

 

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Definitions:

Going Public
This is when a formerly private company converts itself into a publicly traded business and offers its shares to the general investing public.

Initial Public Offering
The first sale of stock by a formerly private company. An IPO (Initial Public Offering) can be used by either small or large companies to raise expansion capital and become publicly traded enterprises. Many companies that undertake an IPO also request the assistance of an Investment Banking firm acting in the capacity of an underwriter to help them correctly asses the value of their shares, that is, the share price.

Public Float
A float entails not only the complete number of shares available to the public, but also the number of shares owned by such.

Market Cap
Market Cap, also correctly referred to as "market capitalization" is the complete monetary value of a given company's outstanding shares. The way market capitalization is calculated is by the multiplication of the number of outstanding shares by the price of one share; the resulting total is the market capitalization of a company.

Initial Valuation
When a company is undertaking the process of going public, as in an IPO, it puts in place a management team to help it decide the correct initial value of its shares. The team will focus on a market price that will reflect the "sweet spot" for the share's price. Meaning: not so low as to give away value for nothing, and not so high as to spook possible investors.

Share Price
The listed price of a given share of stock.

Stock Market
The stock market, also known as stock exchanges or over-the-counter markets provide equity for publicly traded companies. This is one of the most vital aspects of a healthy economy, providing companies with access to capital and offering investors ownership in businesses through buying shares.

Marketmaker
A marketmaker is a firm that provides a mechanism for the buying and selling of stock. The marketmaker takes a small risk with each trade but ensures the overall liquidity of the markets, and receives a small commission for the buying and selling of shares.

Broker/Dealer
This is either an individual or a firm that buys and sells securities and operates as either a broker or a dealer, depending on the nature of the particular trade.

Stock Broker
An individual agent or a firm that receives a commission for arranging the buying or selling of stock orders from their investors or clients.

New York Stock Exchange
The New York Stock Exchange (NYSE) also known as the "Big Board" is located in New York City and is considered the largest equities exchange market in the entire world.

American Stock Exchange
This is one of the biggest USA-based trading exchanges, third by overall volume. The AMEX is New York located and was purchased in 2008 Euronext.

NASDAQ
A trading board that provides price quotations via a computerized system on upwards of 5,000 or more over-the-counter stocks; the NASDAQ came into existence in 1971 and is the world's first and largest electronic trading market.

OTC
A stock that isn't traded on a board with a trading floor, as in most formal exchanges, but on a dealer-to-dealer network.

OTC Pink Sheets
A publication provided by the National Quotation Bureau on a daily basis with bid-and-ask prices for over-the-counter stocks. As opposed to businesses that trade on a regular stock exchange, companies listed on the Pink Sheets do not to meet minimum requirements or provide information to the SEC (Securities and Exchange Commission).

OTC Bulletin Board
A trading service that is electronic and is provided by the National Association of Securities Dealers (NASD) that offers real-time quotes, sales prices, and trading volume info on over-the-counter stocks. Companies that are listed on the OTCBB (Over the Counter Bulletin Board) do have to comply with certain SEC regulations.

S-1 Registration
An S-1 Registration, also known as form S-1, is provided by listing companies to the SEC (Securities and Exchange Commission) regarding the use of capital derived from the sale of stock to the public, the business roadmap to be followed by the company, a basic description of the gist of the offering, and the full disclosure of the associated risks investors will face when buying the stock.

Reverse Merger
A reverse merger is when a private company buys most of the outstanding shares of a shell company and then seats its own board of directors, assuming control in that manner. The two merged companies then execute a stock swap agreement and become one entity. The new directors of the merged entity can then rename the company if they wish to. Most companies that look to execute a reverse merger do so to save the time and expense of a full registration with the SEC, since the public shell structure (the public company) has already gone through SEC registration and received a stock symbol.