Initial Public Offering
What is an Initial Public Offering – IPO
The process of offering shares in a private corporation to the public for the first time is called an initial public offering (IPO). Growing companies that need capitalwill frequently use IPOs to raise money, while more established firms may use an IPO to allow the owners to exit some or all their ownership by selling shares to the public. In an initial public offering, the issuer, or company raising capital, brings in underwriting firms or investment banks to help determine the best type of securityto issue, offering price, amount of shares and time frame for the market offering.
BREAKING DOWN Initial Public Offering – IPO
Some people refer to an IPO as a public offering or “going public.” There are other ways to go public like a direct listing or direct public offering. When a company starts the IPO process, a specific set of events occurs. The chosen underwriters facilitate these steps.
- An external initial public offering team is formed, comprising underwriters, lawyers, certified public accountants and Securities and Exchange Commission (SEC) experts.
- Information regarding the company is compiled, including financial performance and expected future operations. This becomes part of the company prospectus, which is circulated for review after it has been prepared.
- The financial statements are audited, and an opinion is generated.
- The company files its prospectus and required forms with the SEC and sets a date for the offering.