IPO is a sale of corporate securities to the public with a subsequent listing of those securities on an organized stock exchange
An Initial Public Offering (IPO) refers to a sale of corporate securities, usually common stock, to the public with a subsequent listing of those securities on an organized stock exchange such as the New York Stock Exchange (NYSE) or the London Stock Exchange (LSE).
Determining the price of shares to be sold can be tricky. If the price is too high, the offering will be undersubscribed (not all shares intended for sale will be sold). If, on the other hand, the price is too low, the company will fail to maximize the proceeds it will receive from its IPO.
Instructions
1. Prepare all the documents necessary for your IPO. The primary document in any IPO is a firm's prospectus. A prospectus resembles a business plan, including information like business description, corporate governance information, historical and forecasted financial and other data, products descriptions, etc. In addition, every prospectus has information on the securities being offered for sale, like their type and quantity. The price of securities will also have to be included in the prospectus; however, leave that field blank for now.
2. Meet with potential investors. Your investment bank will help you organize "road shows"--presentations of your IPO to different institutional investors that might be interested in buying a part of the shares offered at your IPO. To help you at your presentations, you will use your draft prospectus (in all respects a finished prospectus, but without the price for which your securities will be sold).
3. Determine the price of your shares at IPO. As a result of consultations between you, your investment bank, investors and stock market representatives, a final price for your securities will be known. The prospectus is finalized (the price of shares is included) and registered at relevant authorities (Securities and Exchange Commission in the U.S.). Now your securities can be sold to investors and be admitted to trading on the floor of the stock exchange.
