1. IPO Basics: Introduction
  2. IPO Basics: What Is An IPO?
  3. IPO Basics: Getting In On An IPO
  4. IPO Basics: Don't Just Jump In
  5. IPO Basics: Tracking Stocks
  6. IPO Basics: Conclusion


Let's review the basics of an IPO:

  • An initial public offering (IPO) is the first sale of stock by a company to the public.
  • Broadly speaking, companies are either private or public. Going public means a company is switching from private ownership to public ownership.
  • Going public raises cash and provides many benefits for a company.
  • The dotcom boom lowered the bar for companies to do an IPO. Many startups went public without any profits and little more than a business plan.
  • Getting in on a hot IPO is very difficult, if not impossible.
  • The process of underwriting involves raising money from investors by issuing new securities.
  • Companies hire investment banks to underwrite an IPO.
  • The road to an IPO consists mainly of putting together the formal documents for the Securities and Exchange Commission (SEC) and selling the issue to institutional clients.
  • The only way for you to get shares in an IPO is to have a frequently traded account with one of the investment banks in the underwriting syndicate.
  • An IPO company is difficult to analyze because there isn't a lot of historical info.
  • Lock-up periods prevent insiders from selling their shares for a certain period of time. The end of the lockup period can put strong downward pressure on a stock.
  • Flipping may get you blacklisted from future offerings.
  • Road shows and red herrings are marketing events meant to get as much attention as possible. Don't get sucked in by the hype.
  • A tracking stock is created when a company spins off one of its divisions into a separate entity through an IPO.
  • Don't consider tracking stocks to be the same as a normal IPO, as you are essentially a second-class shareholder.

Related Articles
  1. Insights

    Why Are Companies Taking Longer To Go Public?

    Learn why private companies are waiting longer to have their IPOs. Understand why it may be more advantageous for a company to stay private.
  2. Insurance

    Initial Public Offering (IPO) Explained

    An initial public offering (IPO) marks the start of a company's publicly traded life. Find out why companies undergo IPOs, and how the process works.
  3. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  4. Investing

    What is a Public Company?

    A public company has sold stock to the public through an initial public offering (IPO) and that stock is currently traded on a public stock exchange.
  5. Insurance

    The Ups And Downs Of Initial Public Offerings

    Initial public offerings aren't the best option for every company. Consider these factors before "going public."
  6. Investing

    IPOs Are Becoming Less Attractive for Companies

    U.S. companies are choosing to be acquired instead of going public
  7. Investing

    4 Reasons for the IPO Market Slowdown in 2016 (IPO)

    Pay attention to the length of time a company waits before going public and whether the prolonged period brings excessive valuation.
  8. Investing

    Market Volatility, Weak Economy Delay Major IPOs

    These outside factors can delay and affect IPOs when they are finally listed on a stock exchange.
  9. Insurance

    IPOs For Beginners

    IPO is one of the few market acronyms that almost everyone is familiar with. Discover if IPOS are worth all the attention.
Frequently Asked Questions
  1. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  2. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  3. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
  4. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ...
Trading Center