IPO and Process

What is an IPO?

An IPO, or Initial Public Offering, is the process through which shares of a private company are made available to the public for the first time. This allows the company to raise equity capital from public investors.

The transition from a private to a public company is a crucial time for private investors to fully realize gains from their investment, often including a share premium. Simultaneously, it allows public investors to participate in the offering.

IPO Process

Proposals

Underwriters present proposals and valuations, discussing their services, the best type of security to issue, the offering price, the number of shares, and the estimated time frame for the market offering.

Underwriters

The company selects its underwriters and formally agrees to underwriting terms through an underwriting agreement.

IPO Teams

IPO teams are formed, comprising underwriters, lawyers, certified public accountants (CPAs), and Securities and Exchange Commission (SEC) experts.

Documentation

Information about the company is compiled for the required IPO documentation. The S-1 Registration Statement is the primary IPO filing document. It has two parts—the prospectus and the privately held filing information. The S-1 includes preliminary information about the expected filing date. It will be revised often throughout the pre-IPO process, and the included prospectus is also revised continuously.

Marketing & Updates

Marketing materials are created for pre-marketing the new stock issuance. Underwriters and executives market the share issuance to estimate demand and establish a final offering price. Underwriters can revise their financial analysis throughout the marketing process, including changing the IPO price or issuance date as needed. Companies take the necessary steps to meet specific public share offering requirements, adhering to both exchange listing and SEC requirements for public companies.

Board & Processes

Form a board of directors and establish processes for reporting auditable financial and accounting information quarterly.

Shares Issued

The company issues its shares on the IPO date. Capital from the primary issuance to shareholders is received as cash and recorded as stockholders’ equity on the balance sheet. Subsequently, the balance sheet share value depends on the company’s stockholders’ equity per share valuation.

Post IPO

Some post-IPO provisions may be instituted. Underwriters may have a specified time frame to buy additional shares after the IPO date. Certain investors may also be subject to quiet periods.