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Ipo 1

Initial public offerings (IPOs) allow private companies to offer shares to the public for the first time to raise capital. Companies undertake IPOs to fund expansion plans. The process involves hiring investment banks, filing registration statements with regulatory agencies, determining a suitable price range through investor surveys, and deciding on a final offer price through either book building or a fixed price mechanism.

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Arjun Khosla
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78 views4 pages

Ipo 1

Initial public offerings (IPOs) allow private companies to offer shares to the public for the first time to raise capital. Companies undertake IPOs to fund expansion plans. The process involves hiring investment banks, filing registration statements with regulatory agencies, determining a suitable price range through investor surveys, and deciding on a final offer price through either book building or a fixed price mechanism.

Uploaded by

Arjun Khosla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INITIAL PUBLIC OFFER(IPO)

IPO is a process through which a private company offers shares to


general public for the first time. IPO is also referred to as Going Public.
IPO are often issued by small and young companies who wants to raise
capital to expand their operations.
Example: ABC Ltd is an automobile manufacturer funded through bank
loans and own money , ABC Ltd wants to expand its operation so they
can go public through IPO process and raise money they need for
expansion.
STEPS FOR INITIAL PUBLIC
OFFERING
HIRE INVESTMENT BANKER: The first step in an Initial Public Offering is to hire an investment banker, or
banks, to handle the IPO.
 
EXPERTS MEETING: The management team, auditors, accountants, the underwriting banks, lawyers, and
Securities and Exchange Commission (SEC) experts meet to discuss the offering and determine the timing of
the filing.
 
FILING REGESTRATION STATEMENT(S-1): After the meeting, due diligence is required to be conducted on the
company to make sure the registration statements are accurate. Tasks include market due diligence, legal,
financial and tax due diligence. The end result of the due diligence is the S-1 Registration Statement.
 
PILOT SURVEY OF THE PRICE BAND: Pre-marketing is conducted to determine whether institutional investors
would likely be willing to pay per share. In conjunction with the internal valuation, a price range for the
offering is set and the S-1 Registration Statement is amended with the price range.
 
DECIDING FINAL PRICE: After survey the management team travels around to meet with investors and market
the company. It is a very important process as orders for the number of shares by investors and the price they
are willing to pay are determined. The price range may be further revised.  
BOOK BUILDING
Book Building is used by companies for raising capital through Initial
Public Offers for price and demand discovery.
Book Building is a mechanism where the bids are collected during the
period for which book is open for the offer from investors between the
price band specified by the issuer, the process allows participation of
both the institutional as well as the retail investors. The issue price is
determined after the bid is closed based on the demand generated in
the process.
FIXED PRICE OFFERING
Fixed price offering is used by companies for raising capital through Initial
Public Offers
Under fixed price mechanism, the company going public determines a
fixed price at which its shares would be offered to investors.  The share
price is known to the investor before the company goes public. Demand
from the markets for the share is only known once the issue completed.
To participate in the IPO, the investor must pay the full share price when
making the application.

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