IPO Basics: Conclusion
  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

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.

  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
RELATED TERMS
  1. Investment Banking

    A specific division of banking related to the creation of capital ...
  2. Private Equity

    Private Equity is equity capital that is not quoted on a public ...
  3. Road Show

    A presentation by an issuer of securities to potential buyers. ...
  4. Investment Banker

    Someone working at an institution raising capital for companies, ...
  5. Lloyds Organizations

    An insurance syndicate that bases its organizational structure ...
  6. Volcker Rule

    The Volcker rule separates investment banking, private equity ...
RELATED FAQS
  1. What is Jeff Weiner's educational and professional background?

    Billionaire LinkedIn CEO Jeff Weiner graduated from Wharton University with a degree in economics in 1992 and has enjoyed ... Read Full Answer >>
  2. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  3. When did Facebook go public? (FB)

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  4. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  5. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  6. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
Trading Center