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 from this tutorial:

  • An initial public offering (IPO) is the first sale of stock issued 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, where public shareholders get the right to vote in company decisions.
  • Private companies typically have a small number of closely knit shareholders.
  • Public companies can have thousands of different shareholders.
  • Going public raises cash and provides many benefits for a company.
  • 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 to institutional investors.
  • Companies hire a syndicate of 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 in the market 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.

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