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Title: Initial Public Offering
Description: An initial public offering or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also retail investors.
Description: An initial public offering or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also retail investors.
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The Initial Public Offering (IPO)
Jerome M
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This issue occurs when a privately held
company decides to go public
Also called an “unseasoned new issue
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Select an underwriter
An underwriter is an investment firm that acts
as an intermediary between a company selling
securities and the investing public
The underwriter is the principal player in the
IPO
Typically, the underwriter buys the securities
for less than the offering price and accepts the
risk of not being able to sell them
Types of underwriting
Firm commitment underwriting:
–
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The underwriter buys the entire issue, assuming full
financial responsibility for any unsold shares
Most prevalent type of underwriting in the U
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Best efforts underwriting:
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The underwriter sells as much of the issue as
possible, but can return any unsold shares to the
issuer without financial responsibility
Leading IPO Underwriters
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5
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Register IPO with SEC
The firm must prepare a registration statement
and file it with the SEC
The registration statement discloses all
material information concerning the corporation
making a public offering
3
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Present road-show
The road-show is presented to institutional
investors around the country
The road-show allows firms to raise interest in
the company and thus the price
Allows the firm and its underwriters to gather
information from potential purchasers
5
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Sell the securities
A full-fledged selling effort gets under way on
the effective date of the registration statement
A final prospectus must accompany the
delivery of securities
Average IPO returns over last 5 years
1996:
1997:
1998:
1999:
2000:
23%
24%
37%
276%
-7%
THANK YOU
Title: Initial Public Offering
Description: An initial public offering or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also retail investors.
Description: An initial public offering or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also retail investors.