Do you have a product or service ready to be taken public? Are you considering an Initial Public Offering (IPO) as the next step in taking your business venture to new heights and creating even more value for stakeholders? An IPO can be overwhelming and filled with complex rules and regulations, but it doesn’t need to be.
With this article, we’ll teach you how to navigate the IPO process – from understanding what’s involved, preparing all of the necessary documents, working with a financial institution to set up the transaction, and marketing strategies tailored for a successful public offering – so that by the end of this journey, your organisation will emerge more vital than ever before. Ready? Let’s get started.
What is an IPO, and what does it entail?
An initial public offering (IPO) is when a privately held company dispenses stocks or shares and makes itself available to the public, allowing anyone to become a shareholder. This process entails various financial and legal steps that need to be taken as part of the offering, from setting up a team of professionals to conduct feasibility studies, designing a product roadmap, and specific accounting needs such as adhering to governmental guidelines to offer the company’s stock to sale legally.
A successful IPO can bring immediate capital gains for early investors or those with special access, such as venture capitalists. But for many shareholders, their earnings come from dividends or payments made out of the revenue generated by the sale of goods and services offered by the company. By going public through an IPO, companies gain potential access to markets, credibility through reporting requirements and requirements needed to meet regulation standards, and additional capital to expand their business activities.
The process behind an IPO
The process behind an IPO involves several steps: preparation, submission, and execution. IPOs are typically done through a financial institution that will help the company understand the dos and don’ts of going public and provide guidance on how to meet governmental regulations, such as filing disclosure statements with the Securities & Exchange Commission (SEC).
It is also crucial for companies to work with an experienced legal team to evaluate their contracts, patents, copyrights, trademarks, etc., to ensure that everything is legally sound before the IPO. Once all of these preparatory steps have been taken care of, and all documents have been filed correctly with the SEC, it’s time to launch the offering.
At this stage, the company works with its financial institution to decide who should be part of the offering and what type of securities will be available. Once the security types and the offering participants have been identified, it’s time to start marketing the IPO.
It requires creating an effective advertising campaign that will involve a range of promotional materials such as prospectuses, press releases, television, and radio spots, and print advertisements – all tailored to reach the right target audience. Finally, when the offering is ready to be launched, the company will follow through on the plans set in motion.
Key players in IPOs – whom you need to know about
Regarding IPOs, there are a few key players you’ll need to be aware of before the process begins.
The first is the issuer – the company going public with its offering and typically includes shareholders, directors, officers, advisors, lawyers, and accountants. Then there’s the underwriter – typically an investment bank or securities firm that helps structure the offering and takes on much of the financial risk of launching a successful IPO.
The next player is the regulator – this entity does not participate in any way. Still, it plays a critical role in ensuring the security offered through an IPO meets all legal requirements set by governmental bodies such as SEC. Finally, there are investors – these are the people who buy the securities offered in an IPO and can range from individuals to large institutional investors.
Different types of offerings and stages of closeout
There are a few different types of offerings that companies can pursue when it comes to IPOs. An initial public offering or IPO is the most common type and involves selling securities for the first time.
A secondary offering is one in which additional stocks are sold after an initial offering has already been completed and typically involves selling additional stocks from existing shareholders. A follow-on offering is similar to a secondary offering. Still, it takes place after the company has already gone public and usually entails issuing additional shares of stock from either current or new investors.
Finally, closeout stages refer to the last steps in completing an IPO, including pricing the offer, executing trades, and settling accounts once all the trades have been executed successfully. Depending on the size of the offering, this process can take anywhere from one to six weeks.
