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    Going Public & Initial Public Offerings

    Uploaded by

    Walt Walt
    1. An IPO is when a company sells its shares to the public for the first time and lists its shares on a stock exchange. 2. Companies pursue IPOs to raise cash to fund expansion, pay off debts, and provide liquidity to early investors. However, IPOs are costly due to fees and increased compliance requirements. 3. The IPO process involves hiring an investment bank, filing registration documents with the SEC, creating a prospectus for potential investors, determining the IPO price through roadshows, and listing shares on an exchange. While IPOs provide opportunities, they also introduce risks from increased scrutiny and information gaps.

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    © All Rights Reserved
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    Going Public & Initial Public Offerings

    Uploaded by

    Walt Walt
    35 views26 pages
    1. An IPO is when a company sells its shares to the public for the first time and lists its shares on a stock exchange. 2. Companies pursue IPOs to raise cash to fund expansion, pay off debts, and provide liquidity to early investors. However, IPOs are costly due to fees and increased compliance requirements. 3. The IPO process involves hiring an investment bank, filing registration documents with the SEC, creating a prospectus for potential investors, determining the IPO price through roadshows, and listing shares on an exchange. While IPOs provide opportunities, they also introduce risks from increased scrutiny and information gaps.

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    Going Public & Initial Public Offerings

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    1. An IPO is when a company sells its shares to the public for the first time and lists its shares on a stock exchange. 2. Companies pursue IPOs to raise cash to fund expansion, pay off debts, and provide liquidity to early investors. However, IPOs are costly due to fees and increased compliance requirements. 3. The IPO process involves hiring an investment bank, filing registration documents with the SEC, creating a prospectus for potential investors, determining the IPO price through roadshows, and listing shares on an exchange. While IPOs provide opportunities, they also introduce risks from increased scrutiny and information gaps.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    35 views26 pages

    Going Public & Initial Public Offerings

    Uploaded by

    Walt Walt
    1. An IPO is when a company sells its shares to the public for the first time and lists its shares on a stock exchange. 2. Companies pursue IPOs to raise cash to fund expansion, pay off debts, and provide liquidity to early investors. However, IPOs are costly due to fees and increased compliance requirements. 3. The IPO process involves hiring an investment bank, filing registration documents with the SEC, creating a prospectus for potential investors, determining the IPO price through roadshows, and listing shares on an exchange. While IPOs provide opportunities, they also introduce risks from increased scrutiny and information gaps.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 26

    Going Public 

    & Initial
    Public Offerings
    JUN SUN
    DBMN 610A – CORPORATE FINANCE
    WHAT IS AN IPO?

    INITIAL PUBLIC OFFERING


    IPO

    AnIPO is the first sale of a


    company’s shares to the public and
    the listing of the shares on the
    stock exchange.
    Why do companies go public?
     The first reason is “CASH”
    Why do companies go for the IPO?

     Companies get the chance to enhance


    their publicity.
     Provides access to lots of cash to expand
    operations.
     Companies can pay their debts.
    IPOs ARE COSTLY

     Direct costs:
     Fees paid to lawyers, accountants consultants and investment banks

     Indirect costs:
     Increased formalization in the decision process
     Resulting burden of disclosure requirements and the compliance costs
     Increased pressure for short-term performance
     Underpricing
     Risks
     Exposure to takeover
    How companies go for an IPOs?

     First seeks out Foreign Investment Bank, investment banks. So now these
    investment bankers actually do a complete analysis of the company. They
    study their business models, they forecast the financials and finally they
    come up with something called the overall company's valuations.
     Next, the company needs to file a registration statement with the SEC or the
    Securities Exchange Commission. This statement includes information such as
    the company's operations, finances, business model, etc.
    How companies go for an IPOs?

     The final part is where the company with the help of investment bankers to
    prepares a documented prospectus this prospect is actually distributed to
    potential investors such as large institutions and wealthy individuals. This
    prospectus contains information such as the company's performance, future
    prospects, etc.
    What is the IPO process?

     Companies meet investment banks that help in preparing their valuation.


     Companies file a registration statement with the security exchange
    commission
     Investment bankers prepare a company’s prospectus and distribute it to
    potential investors to help the companies determine their IPO value and the
    number of shares.
     And finally, the company goes public on a fixed date.
    How does the company know what stock
    value to set?
     Actually, the company management along with investment bankers to lots of
    roadshows, roadshow mean basically it means that they connect and invite
    lots of interested investors to get a fair indication of how many shares they're
    interested in buying and attended price. And after this roadshow, the
    company actually has a fair idea of how many people are willing to buy the
    shares, and what numbers and the tentative price accordingly they said the
    IPO price and the number of shares which each investor can get
    Going public has many advantages
    attached to it.
     IPO actually helps with the publicity part of the company, which will
    eventually help the company with its extensive customer base.

     Another advantage is that it will lead to an inflow of cash that the company
    can use to expand its operations or pay off its debt.
    Going public has many advantages
    attached to it.
     One of the other advantages is that the founder, early investors on even
    employees who were given ESOPs of the company, hey can earn a lot of
    money when the company goes public because it's like a liquidity event for
    them. I'm sure you must have heard about people becoming millionaires. Or
    even billionaires when the company goes public.
    Going public has disadvantages attached
    to it as well
     The flip side is that public companies are under constant regulation by
    authorities such as the Security and Exchange Commission or the SEC.
     And with this they have to file for the quarterly report, the annual reports as
    well as report anything any changes related to the management shareholding
    Going public has disadvantages attached
    to it as well
     Another disadvantage is that these companies, the public companies are
    under huge market pressure because they're under constant scrutiny from the
    investors. If the company fails to deliver on the financial results, then the
    management or maybe the owner might even get fired from their own
    company.
    What is the best time to invest in these
    IPOs?
     First even looking at a short-term profit from trading then you can definitely
    invest in these IPOs and reap the profits from the price increase on the very
    first day. But after that first day, you at least where your profits. However, if
    you are considering from a long-term investment plan perspective, in that
    case, you must do your proper research about the company. Its cash flows,
    track records, finances, etc. And only then you should invest in the IPO.
    What is the best time to invest in these
    IPOs?
     another approach would be to wait and watch and watch for a few weeks,
    months, or maybe even a few years where the frenzy has disappeared. Prices
    are down. That's when you invest. A classic example would think of Facebook,
    Facebook in the initial three years if the stock went nowhere. But after it
    came out of the slump. It's now at an all-time high.
    Should you invest in IPOs?

     Investing in IPOs is one of the best ways to create your portfolio of


    investments. Remember, just invest in Nigeria because it is hot and everyone
    is interested. It really doesn't make sense. You should do your own research
    before investing. And we have also seen and heard many stories that people
    have made fortunes out of these IPOs

     However, with every market investment, there comes a certain degree of risk
    so putting your money in IPO also depends on how much risk are you willing to
    tolerate.
     In 2019, Uber, the popular ride sharing app is set to become a public company
    undergoing what may very well be the largest IPO in US history. It's just one
    of the big names lined up to begin trading on stock exchanges that year
    1. Hire Investment Banker

    2. File a Registration Statement

    3. Create a prospectus
    Oversubscribe

     Now sometimes an IPO will be oversubscribe, meaning that the demand for
    shares is higher than the number of shares being sold in the IPO. And when
    this happens it means that some investors will only get a fraction of what
    they asked for, while others will be left with nothing.
     But the last with all regulatory requirements met and IPO price set and
    subscriptions confirmed the IPO date comes in the company sells their shares
    as per their allocation, celebrating their success with the ringing of the
    exchange bell in honor that notable IPOs received in a very euphoric moment
    for those involved.
    The primary objective of an IPO is to
    raise money
     That means that the investment banker and the company are going to try and
    get the highest price for their shares. After all, the owner is effectively
    cashing out all or at least part of their ownership. So naturally do want to sell
    high, something that goes against an investor's objective of buying low.
    IPO introduced a number of unique risks
    and disadvantages
     Firstly, there's a large information gap between the buyers and the sellers of
    the company here. the stock prospectus helps highlight important details.
    There's a very limited range of historical data.
    IPO introduced a number of unique risks
    and disadvantages
     Secondly, individual investors like you and I are at a particular disadvantage
    with IPOs in that we often can't get access to the IPO allocation. The majority
    of an IPO shares are generally allocated to large institutional investors made
    it very difficult for an investor to receive part of the allocation.
     In the end, it's impossible to know whether up-and-coming IPOs like Uber well
    over or underperform. It's easy to get caught up in the hype surrounding these
    companies. But it's important to recognize the added risks and remain
    objective when enthusiasm runs rampant.

     “Be fearful when others are greedy and greedy when others are fearful”
    Thank you

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