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.
InvestingLearn why private companies are waiting longer to have their IPOs. Understand why it may be more advantageous for a company to stay private.
InvestingA 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.
Managing WealthThinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
InvestingInitial public offerings aren't the best option for every company. Consider these factors before "going public."
InvestingThe initial valuation of an IPO can determine the success or failure of a specific stock - but how is that price determined?
MarketsPay attention to the length of time a company waits before going public and whether the prolonged period brings excessive valuation.
MarketsTaking a company public isn't easy. Here's what you need to know to make sure you and your firm are prepared for the realities of being a public entity.
MarketsInterested in investing through IPOs? Here is the list of free sources for information on upcoming IPOs.
InvestingMany private companies prefer to stay private and find alternate sources of capital. Find out what firms have to gain by eschewing the windfall from a flashy IPO.
Managing WealthSmall companies looking for growth often use an initial public offering to raise capital. But going public brings both advantages and disadvantages.