Initial Public Offerings
Type of public offerings in which shares of a company are sold to investors for the first time on a securities exchange. This is the first issuance of stock securites by a private company to the public.
OVERVIEW
Issuers use the services of investment banks to determine price, type, and timing of the offering.
The investbank banks act as underwriter in the IPO deal
UNDERWRITING
The process by which investment banks raise capital for corporations and governments by selling and packaging securities. It involves accepting liability and guaranteeing the amount of capital that the clients aim to raise.
IPO LOCK UP
PRE-IPO PLACEMENT
The process by which a portion of an IPO, which is scheduled for sale in the capital markets, is placed with private investors willing to buy a large stake in the issuing company. These private investors are usually large private equity funds and hedge funds, which capitalize on the large size of the pre-IPO investments. The funds are able to secure lower prices as compared to the prospective IPO prices.
With pre-IPO placements there is generally a lock-in period, which ensures that the private investors do not immediately sell the shares in the capital markets before the issuing company issues the IPO. This is also a financial strategy for the issuers, which secures long term equity investments for the company.
IPO PROSPECTUS
A formal legal document required and filed by a corporation with a securities authority regarding a prospective Initial Public Offering. The prospectus details all the relevant information necessary for investors to make informed investment decisions concerning the company.
